Calls ring up quick gains in $M

Bullish option traders pocketed some fast money in Macy’s ahead of its earnings report next week.

On Aug. 7, Investitute’s market scanners showed that 1,400 Weekly $39.50 calls expiring this afternoon were purchased for $0.39 to $0.56 with shares at $39.42. These were clearly new positions, as open interest in the strike was only 425 contracts before the trades occurred.

Those calls sold for $1.03 this morning, more than 2.5 their initial purchase price. The stock rose less than 2.7% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a 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.

M traded up to $40.70 this morning before pulling back with the rest of the market and closing at $39.96, down 1.48% on the session. The department store operator is scheduled to announce quarterly results on Aug. 15 before the market opens.