$LEVI call prices zip higher

Option traders are cashing in major profits on bullish positions in Levi Strauss & Co. (LEVI) today.

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity during two consecutive sessions in calls that captured the company’s earnings report.

–On Oct. 1, 2,400 October $14 calls were purchased for $0.60 to $0.82 above open interest of 910 contracts with shares at $14.01.
–On Oct. 2, 3,800 more October $14 calls were purchased for $0.60 to $0.75 below open interest of 4,107 contracts with shares at $13.60, but appearing to add to the previous day’s volume.

Those calls have traded for as much as $2.54 so far this morning, at least 3 times their purchase prices. The stock rose by as much as 21.03% in the same time period, illustrating how options can far outperform moves in their underlying shares on a relative basis.

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.

LEVI is up 6.45% to $15.69 this morning. The clothing company beat earnings expectations after the closing bell yesterday.