$HD call prices double

Option traders who opened bullish positions in Home Depot (HD) in March are making huge gains today.

On Mar. 16, Market Rebellion’s Unusual Activity Service found that 2,990 August $185 calls were bought as part of a complex bullish spread for $19.90 with shares at $166.71. This was clearly a new position, as there was no open interest in the strike before that session began.

Those options have traded for as much as $55.90 this afternoon, more than 2.5 times their purchase price. The stock rose 42.81% at the same time, underscoring how quickly options can far outperform 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.

HD today closed up by 0.93% at $236.56 today. The home-improvement giant will report quarterly earnings on May 19 before the market opens.