Those callslock in the price investors must pay for the shares. Their relatively cheap price gives them big leverage to even modest gains in the stock on a percentage basis. However, they have a limited lifespan and will expire worthless if it fails to move.
Stryker continued higher throughout the session and closed at $54.23 yesterday, up 1.69 percent. Those same calls would fetch $0.90 and $0.95 by the afternoon — a gain of about 40 percent.
The company is scheduled to report earnings after the bell on April 17. Overall options volume was triple the daily average yesterday, with calls outnumbering puts by 19 to 1.
—Russell has no positions in SYK.
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David Russell is a reporter and writer for OptionMonster.