Bulls rev up profits in $HOG

Option traders made exponential returns on their money in Harley-Davidson (HOG) today.

On Oct. 15, Market Rebellion’s proprietary programs found that 3,000 Weekly $39.50 calls expiring this Friday were purchased for $0.21 to $0.23, as part of a bullish spread, with shares at $36.31. There was no open interest in the strike before the trades occurred, showing that this was fresh buying.

Those calls have traded up to $1.28 this morning, more than 5 times their initial purchase price. The stock rose 10.52% at the same time, illustrating the kind of leverage that can be achieved quickly 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.

HOG has jumped higher this session, reaching $40.36 after the opening bell and currently up 6.01% at $39.31. The motorcycle icon beat earnings estimates this morning on both its top and bottom lines.