Calls draw big gains in $DSW overnight

Bullish option traders tripled their money today as DSW proved to be one of the winning retailers this earnings season.

Late yesterday, Investitute’s tracking systems detected the purchase of 2,000 September $15 calls for $1.35 to $1.55 with shares at $15.67. These were clearly new positions, as open interest in the strike was only 274 contracts before the activity appeared.

Those calls traded up to $4.34 today, an average gain of 200 percent just one session later. The stock surged 22.8 percent at the same time, a big move but still far less than that of its options.

Long calls lock in the price where the 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.

DSW jumped 17.46 percent to close today at $18.43 after peaking at $19.39 in the morning. The discount-shoe chain spiked higher after earnings and sales beat expectations before the market opened. Short interest in the name was estimated at 13 percent of the float.