Bulls lay down gains in $MHK

Bullish option traders doubled their money on upside call positions on Mohawk (MHK) after its earnings report.

On Jul. 13, Market Rebellion’s Unusual Activity scanners showed that 5,500 August $75 calls were bought for $6.20 to $7.80 with shares at $71.47. This was clearly a new position, as open interest in the strike was only 108 contracts before that session began.

Those calls traded for as much as $15.00 today, more than double their average purchase price. The stock rose 25.69 % in the same time frame, 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.

MHK closed down by 0.82% at $85.65 today after trading as high as $90.36 earlier in the session. The flooring manufacturer beat estimates on its top and bottom lines when it reported for its Q2 period after the market closed last night.