$AAL calls take flight

It has taken just two sessions for bullish option traders to triple their money in American Airlines (AAL).

On the morning of Feb. 22, our unusual tracking systems detected the purchase of 5,000 Weekly $20.50 calls, expiring this Friday, Feb. 26, for $0.33 to $0.74 above open interest of 905 contracts with shares at $19.97.

Those calls traded for as much as $1.67 this morning, over 3 times the average of their purchase prices. The stock rose 10.72% at the same time, showing how quickly options can far outpace gains in their underlying shares 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.

AAL was up 5.61% to $21.82 at the close. The carrier’s price target was upgraded at Stifel this morning, to $20 from $14.