Bulls riding high as $RL gallops ahead

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Upside option trades scored big in Ralph Lauren before expiring today, thanks to strong quarterly results earlier in the week.

On July 21, Investitute’s scanners found that 2,200 Weekly $75 calls that expired this afternoon were purchased for $2.60 to $2.70 with shares at $74.28. Open interest in the strike was a mere 2 contracts before the trades occurred, showing that they were new positions.

Those calls were listed for $8.95 at the close, representing a profit of more than 230 percent, though they were clearly marked much higher earlier in the session when shares were rallying. The stock was up less than 13 percent in the same time frame, illustrating the kind of leverage that can be achieved through options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

RL ended today off 0.07 percent to $83.78, well off its intraday high of $85.71 this morning. The iconic fashion retailer beat earnings estimates Wednesday morning.

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Mike Yamamoto | Investitute

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