Calls build quick gains in $DHI

It took only a few days for bullish option traders to triple their money in D.R. Horton (DHI).

On Jan. 22, Market Rebellion’s Unusual Activity Service flagged the purchase of 6,500 February $62 calls bought for $0.26 to $0.29 with shares at $57.39. This was clearly fresh buying, as open interest in the strike was only 20 contracts before that session began.

Those calls have traded for as much as $1 so far today, more than 3 times their purchase prices. The stock rose 5.94% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

DHI is up 2.93% to $60.22 this morning. The homebuilder topped quarterly estimates and raised its revenue outlook before the market opened today.