$GRUB calls soar 3-fold within a week

Option traders are racking up enormous profits today on upside positions opened in GrubHub (GRUB) at the beginning of this week.

On Monday, Nov. 11, Market Rebellion’s proprietary programs found that 3,500 November $38 calls expiring today were bought for $0.50 to $0.77 with shares at $37.08. Open interest in the strike was only 616 contracts before the trades occurred, showing that these were new positions.

Those calls have traded for as much as $2.35 today, more than 3.5 times their average purchase price. The stock has gained 8.98% at the same time, a large one-week move but still nowhere near that of its options on a relative basis.

Long calls lock in the price where a 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.

GRUB is up 3.73% to $40.02 in morning trading. Barclays double upgraded the food-delivery service to Overweight from Underweight and raised its price target on the stock to $51 from $27.