$LB call buyers post quick gains

L Brands reversed higher this morning, handing quick gains to upside option positions opened just one session earlier.

Just yesterday, Investitute’s proprietary programs found that 1,600 Weekly $35 calls expiring tomorrow were purchased for $0.55 to $0.70 with shares at $34.09. This was clearly fresh buying, as volume was well above the strike’s open interest of 689 contracts.

Those calls traded up to $1.10 this morning, twice their initial purchase price. The stock rose 5.5% 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.

LB was up 3.44% to $35.22 today. The parent company of Victoria’s Secret and Bath and Body Works fell sharply after yesterday’s close on poor same-stores sales, but shares rebounded sharply this morning when management outlined its plans to target younger consumers.