Call buyers run up score in $PLAY

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Bullish option traders pocketed big profits today in Dave & Buster’s Entertainment thanks to strong earnings.

On Oct. 13, Investitute’s market scanners identified the purchase of 3,500 January $50 calls for $2.10 to $2.49 as part of a bullish spread with shares at $47.55. This was clearly a new position, as open interest in the strike was only 204 contracts before the trade occurred.

Those calls sold for $7.50 today, more than 2.5 times their original purchase price. The stock rose 19.6 percent in the same time period, showing how options can far outperform gains in their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

DAVE spiked up to $57.15 this morning but pulled back to end the session off 0.32 percent at $52.72. The restaurant and entertainment chain beat third-quarter estimates after the market closed yesterday.

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Mike Yamamoto

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