Calls turn quick gains in $LB

Nimble option traders made money on bearish options in L Brands last month, but today they’re collecting profits on the upside.

On Sept. 5, Investitute’s proprietary programs showed that 3,000 Weekly $26.50 calls expiring this afternoon were purchased for $0.35 to $0.40 with shares at $26.29. These were clearly new positions, as open interest in the strike was only 494 contracts before that session began.

Those calls traded up to $0.69 this afternoon, twice their initial purchase price. The stock rose 3.42% in the same time frame, illustrating how quickly options can far outpace gains in their underlying shares.

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.

LB  was up 0.54% to $27.09 today. The retailer, whose brands include Victoria’s Secret and Bath & Body Works, fell after lowering its outlook last month but bounced after monthly comparable-store sales beat estimates yesterday morning.