$MIK call prices spike overnight

Option traders tripled their money today on bullish positions opened in Michaels (MIK) only one session earlier.

Just yesterday, Our proprietary programs flagged the purchase of 19,000 October $7.50 calls for $0.15 to $0.25 with shares at $5.26. This was clearly a fresh buying, as open interest in the strike was only 511 contracts before the activity appeared.

Those calls traded for as much as $0.67 this morning, more than 3 times their average purchase price. The stock surged 30% at the same time, a big move but nowhere near that of its options on a relative basis.

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.

MIK reached $7.13 right after the opening bell but has pulled back to $6.24, still up 11.43% on today’s session. The heavily shorted art-supplies retailer topped earnings and sales expectations.