Call prices quintuple in $LUV

Bullish option traders have racked up huge profits in Southwest Airlines.

On June 6, Investitute’s market scanners identified the purchase of 2,200 September $52.50 calls for $1.98 to $2.25 with shares at $50.63. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,075 contracts.

Those calls sold for $10 today, more than 5 times their initial purchase price. The stock rose 23.23% in the same time period, a large move but nowhere near that of its options.

Investitute co-founder Pete Najarian cited even more buying in the Weekly $60 calls that expire Sept. 28 on CNBC’s “Halftime Report” today.

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.

LUV was up 1.13% to $61.99 today. The airline carrier’s stock rose amid projections for strong traffic over the Labor Day holiday.