$GME calls turn quick profits

It took just three sessions for traders to double their money in GameStop.

On Monday, Investitute’s market scanners cited the purchase of 7,100 May $12.50 calls for $0.50 to $0.80 with shares at $13.17. These were clearly new positions, as open interest in the strike was only 247 contracts before that session began.

Those calls traded for $1.35 today, more than 2.5 times their initial purchase price. The stock rose 5.4% in the same time frame, 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.

GME was up 0.3% to $13.55 today. The game retailer spiked higher this morning on news that hedge fund Tiger Management had urged the company’s board to conduct a strategic review.