Bulls ring register with $XRT

It took only a few hours for option traders to double their money on upside positions in the SPDR S&P Retail Fund (XRT) today.

About 20 minutes after the opening bell, Our tracking systems found that 20,000 Weekly $40 calls expiring on Sept. 6 were purchased for $0.22 to $0.26 above open interest of 183 contracts with shares at $38.94. Co-founder Pete Najarian cited the unusual activity on CNBC’s “Halftime Report” today.

Those calls traded up to $0.56 by the afternoon, more than 2.5 times their initial purchase price. The stock rose 1.95% at the same time, showing how quickly options can far outpace gains in 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.

XRT rose 2.67% to close at $39.55 today. The exchange-traded fund has rallied along with key retailers that have beat quarterly expectations.