Call double on $TPR bounce

Bulls who opened upside option positions in Tapestry (TPR) are seeing their bets take flight today.

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the same contract on separate occasions in the past several weeks:

–On Aug. 6, 7,700 September $15 calls were purchased for $1.00 to $1.09 above open interest of 326 contracts with shares at $14.07.
–Then again on Sep. 10, 6,600 September $15 calls were purchased for $0.60 to $0.65 below open interest of 6,968 contracts but apparently adding to the earlier trade, with shares at $15.05.

Those calls have traded for as much as $2.45 today, at least 2 times their purchase prices. The stock rose as much as 24.24% in the same time frame, underscoring 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.

TPR opened up to $17.59 this morning but was last down 3.94% to $16.83 in late-day trading. The retailer, formerly Coach, was initiated with an Outperform and $23 price target on Thursday at Exane BNP Paribas.