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Bulls ring the cash register in $LB
Option traders cashed in large profits on L Brands today ahead of quarterly results next week. On Oct. 31, Investitute’s market scanners identified the purchase of 4,000 December $32.50 calls for $1.97 to $2.15 with shares at $32.57. This was clearly fresh buying, as open interest in the strike was only 284 contracts before the […]
Option traders cashed in large profits on L Brands today ahead of quarterly results next week.
On Oct. 31, Investitute’s market scanners identified the purchase of 4,000 December $32.50 calls for $1.97 to $2.15 with shares at $32.57. This was clearly fresh buying, as open interest in the strike was only 284 contracts before the trades occurred.
Those calls sold for $5.20 today, more than 2.5 times their average purchase price. The stock rose 14.49% in the same time frame, underscoring 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.
LB was up 1.4% today to close at $37.01. Wells Fargo upgraded the stock to “outperform” from “neutral” this morning and raised its price target to $55 from $30. The apparel retailer is scheduled to report earnings after the market closes on Nov. 19.