Call buyers score big in $HDS

Bullish option traders doubled their money in HD Supply after shares hit new highs today.

On May 10, Investitute’s market scanners identified the purchase of 2,100 September $40 calls for $2.70 to $2.95 with shares at $39.54. These were clearly new positions, as open interest in the strike was only 916 contracts before the activity appeared.

Those calls traded up to $5.91 today, more than twice their purchase prices. The stock rose 15.48% in the same time period, illustrating the kind of leverage that can be achieved 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.

HDS was up 1.71% to close at $45.79 today after reaching an all-time high of $45.84 minutes earlier. The construction-supply company is scheduled to release second-quarter results on Sept. 5 before the market opens.