$MAT calls triple after one session

Mattel has rebounded sharply in the last two sessions, yielding major profits on bullish option positions.

On Jan. 4, Investitute’s tracking systems found that 3,100 Weekly $10 calls expiring on Jan. 11 were purchased for $0.35 to $0.53 with shares at $10.21. This was clearly fresh buying, as open interest in the strike was a mere 85 contracts before the trades occurred. Investitute co-founder Jon Najarian discussed Mattel on CNBC’s “Halftime Report” today.

Those calls sold for $1.40 today, more than 3 times their average purchase price. The stock rose 10.68% at the same time, 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.

MAT jumped 7.68% to $11.21 today. Najarian pointed out that the beaten-down toy maker has rallied off what may be a bullish double-bottom pattern as the market becomes more optimistic on the retail sector.