$HD call prices quadruple in days

Option traders who opened bullish positions in Home Depot (HD) just last week are already posting big profits.

On Jan. 16, Market Rebellion’s Unusual Activity Service found that 5,000 Weekly $237.50 calls expiring this on Feb. 7 were bought for $0.36 to $0.64 with shares at $225.76. This was clearly a new position, as open interest in the strike was just 46 contracts before that session began.

Market Rebellion co-founder Jon Najarian cited the unusual activity at the time on CNBC’s “Halftime Report.”

Those options have traded for as much as $2.23 this afternoon, about 4 times their average purchase price. The stock rose 3.89% at the same time, underscoring how quickly options can far outperform their underlying shares.

It is the second winning trade in the name to be posted by Market Rebellion in as many days.

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 is up 0.54% to $234.16. The home-improvement giant will report quarterly earnings on Feb. 25 before the market opens.