Long calls lock in how much investors must pay to buy a stock, so they can generate major leverage in the event of a rally. But these options can lose most or all of their value if the shares fail to move.
Constellation shares rose 0.82 percent to $32.76 yesterday. It’s been exploding higher since late June, when it took over selling Corona beer in the U.S. The shares had fallen in the last week, and yesterday’s call buyer apparently thought it was a good entry point.
The trade occurred less than $0.20 from the bottom of the stock’s range in the session and was followed by a rebound in the share price. Total option volume was 24 times greater than average.
—By CNBC Contributor David Russell
Additional News: Constellation Brands to Use Proceeds to Fund Deal
Additional Views: Corona Looks to Keep the Beach Party Going
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in STZ.