$LB calls turn quick profits

Option traders have more than doubled their money on bullish positions opened in L Brands (LB) less than a week ago.

On Nov. 20, our Unusual Activity Service showed that 5,000 Weekly $17 calls expiring on Dec. 6 were bought for $0.85 to $0.87 above open interest of 7 contracts with shares at $16.14. Market Rebellion co-founder Jon Najarian said cited heavy call buying in the name on CNBC’s “Halftime Report” the next day and said he had purchased calls as well.

Those calls have traded for as much as $1.80 today, more than twice their purchase prices. The stock rose 15.86% in the same time frame, 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.

LB is up 4.16% to $18.76 this afternoon amid reports that the company is considering strategic alternatives. The retailer, whose brands include Victoria’s Secret and Bath & Body Works, reported earnings in line with expectations on Nov. 20.