Bulls double their money in $BZH

Beazer Homes shares rocketed more than 30% on strong quarterly results today, returning sizable gains on upside option positions.

On Oct. 17, Investitute’s market scanners identified the purchase of 7,500 May $11 calls for $1 to $1.10 with shares at $9.76. This was clearly fresh buying, as open interest in the strike was a mere 63 contracts before the trades occurred.

Those calls rose to $1.95 this afternoon, just shy of twice their initial purchase price. The stock rose 14.55% in the same time period, showing how 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.

BZH spiked higher by 30.65% to $10.87 today. The homebuilder blew past earnings and revenue estimates before the market opened this morning.

(Disclosure: I am long BZH.)