$CARG trade turns quick profits

A bullish option strategy opened in CarGurus only two sessions ago was closed today with exponential gains.

Just before trading ended on Aug. 7, Investitute’s tracking systems identified the purchase of 1,600 August $50 calls for $1.38 to $1.80 as part of a bullish spread with shares at $46.50. These were clearly new positions, as there was no open interest in the strike.

Those calls were closed for $5 this morning, more than 3.5 times their initial purchase price. The stock rose 18.3% in the same time frame, showing how quickly options can far outpace 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.

CARG was up 1.62% to $54.64 today. The automotive research and shopping website posted a beat on both the top and bottom in its earnings report delivered after the close on Aug. 7, triggering a slew of analyst upgrades.