Option traders racked up exponential profits overnight after DSW reported quarterly results today.
Just yesterday, Investitute’s proprietary systems flagged the purchase of 5,152 March $20 calls for $0.70 and $0.75 as part of a bullish spread with shares at $19.24. Volume was far above the strike’s open interest of 1,697 contracts, showing that this was a new position.
Those calls traded up to $1.95 today, nearly 3 times their original purchase price. The stock rose 13.5% in the same time frame, underscoring how options can far outperform 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.
DSW jumped 10.71% to $21.70 today. The discount-shoe retailer rallied on strong guidance and turnaround plans announced this morning.