$EAT calls quadruple overnight

Traders who opened bullish options positions in Brinker International (EAT) yesterday afternoon are eating up huge gains this session.

Yesterday, on Feb. 1, Market Rebellion’s Unusual Activity Service found that 2,700 February $40 calls were bought for $0.30 to $0.49 with shares at $33.23. This was clearly fresh buying, as open interest in the strike was just 756 contracts before the activity appeared.

Those calls have traded for $2.40 so far this session, more than 4.5 times their original purchase price. The stock rose 21.04% at the same time, 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.

EAT was last up 8.78% to $37.78 afternoon trade.