$KSS calls double overnight

Option traders score big gains today from bullish option bets made on Kohl’s at the last minute yesterday.

In the final half-hour of trading on Monday, Investitute’s market scanners identified the purchase of 3,600 March $67 calls for $2.40 to $2.60 with shares at $66.91. This was clearly fresh buying, as open interest in the strike was a mere 76 contracts before the activity appeared.

Those calls traded for as much as $4.80 this afternoon, twice their initial purchase price. The stock rose 6.9% at the same time, 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.

KSS jumped 7.31% to $71.33 today. The heavily shorted discount retailer topped quarterly estimates and issued strong guidance before the market opened this morning.