Calls run up profits in $DHI

It has taken less than a week for option traders to double their money in homebuilder D.R. Horton.

On Feb. 7, Investitute’s tracking systems flagged the purchase of 2,450 March $41 calls at the same time for $0.53 with shares at $37.92. This was clearly a new position, as open interest in the strike was only 372 contracts before the activity appeared.

Those calls traded for as much as $1.41 this afternoon, more than 2.5 times their purchase price. The stock rose 7.15% in the same time frame, showing 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.

DHI jumped 7.55% to $40.61 today. Homebuilders have rebounded sharply and have outperformed the broader market this year.