Smart shopping pays off for $WSM bulls

Wsm824

Bullish option traders doubled their money overnight in bullish positions on Williams-Sonoma.

Yesterday afternoon, Investitute’s market scanners identified the purchase of 4,600 September $45 calls for $1.05 to $1.27 with shares at $43.04. These represents new positioning, as volume was well above the strike’s open interest of 3,671 contracts.

Today those calls traded up to $2.77 right after the opening bell, representing a profit of 128 percent in less than 24 hours. The stock rose 9.4 percent at the same time, illustrating how fast 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.

WSM was up 3.59 percent today to close at $44.96 after reaching a high of $47.35 just as the session began. The home-furnishings and cookware retailer topped earnings estimates after the market closed yesterday.

Start your free trial

Mike Yamamoto | Investitute

Learn more about Unusual Option Activity and join the conversation!