Call buyers run higher with $FL

Bullish option traders have doubled their money in Foot Locker.

On March 23, Investitute’s tracking systems detected the purchase of 2,513 May $44 calls for $2.25 as part of a bullish spread with shares at $43.44. This was clearly a new position, as open interest in the strike was only 243 contracts before the trade occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $5 late this afternoon, more than twice their purchase price. The stock rose 10.8% in the same time frame, illustrating 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.

FL was up 0.25% today to close at $47.91. Najarian said the shoe retailer would benefit from the recent rally in Nike.