Bulls keep winning in $LL

Option traders are ringing up profits in Lumber Liquidators (LL) for the second day in a row.

On Aug. 12, Our proprietary programs identified the purchase of 2,500 September $11 calls for $0.15 with shares at $8.03. Open interest in the strike was a mere 21 contracts before the trade occurred, showing that this was a new position.

Those calls sold for $0.30 today, twice their purchase price. The stock surged 32.5% in the same time period, a huge move but still well below that of its options on a relative basis,  illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

It is the second winning trade in the name posted Unusual Option Activity in as many days.

LL is up 5.26% to $10.61 in morning trading. The heavily shorted lumber retailer has spiked higher this week on speculation that its founder may try to take the company private and combine it with Cabinets to Go.