$LEN call prices soar 11-fold

Option traders have racked up huge gains on bullish positions in Lennar.

On Oct. 12, Investitute’s market scanners identified the purchase of 2,100 February $50 calls for $0.13 with shares at $42.84. This was clearly new positioning, as open interest in the strike was only 227 contracts before that session began.

Those calls rose to $1.47 today, more than 11 times their purchase price. The stock rose 3.64% in the same time period, underscoring how 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.

LEN was up 2.56% to $44.39 today. The shares have climbed off 52-week lows as homebuilders have rebounded in recent weeks.