$LB calls turn large profits

Option traders are turning big profits on longer-duration bullish positions opened in L Brands (LB).

On Jul. 21, our Unusual Option Activity Service showed that 15,000 January $22.50 calls were bought for $2.59 to $2.64 as part of a bullish roll with shares at $18.77. Volume was well above above the strike’s previous open interest of just 1,838 contracts, showing that these were new positions.

Those calls were last marked at $14.10 today, more than 5 times their purchase prices. The stock rose 106.39% in the same time frame, underscoring how quickly 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.

LB is up 14.99% to $38.74 this morning after the retailer reported an increase of 28% for its comparable store sales in Q3.