$DRI call prices surge sixfold

Darden Restaurants rallied sharply on strong quarterly numbers today, handing huge profits to bullish option traders.

On May 17, Investitute’s tracking systems detected the purchase of 2,000 July $85 calls in one print for $3.50 with shares at $85.21. Open interest in the strike was only 562 contracts before the trade occurred, showing that it was a new position.

Those calls sold for $22.70 today, more than 6 times their purchase price. The stock rallied 26.34% in the same time period, showing how options can far outperform 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.

DRI spiked higher by 14.79% today to close at $107.06. The restaurant operator, whose chains include Olive Garden and LongHorn Steakhouse, beat estimates on the top and bottom lines this morning.