Long-term $LOW calls up 6-fold

Option traders have scored huge profits on bullish contracts bought in Lowe’s (LOW) more than two years ago.

On Sept. 22, 2017, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,500 January 2020 $100 for $2.95 to $3.35 with shares at $78.39. Open interest in the strike was a mere 8 contracts before that session began, showing that this was fresh buying.

Those calls traded for as much as $18.70 so far today, about 6 times their average purchase price.  The stock rose 50.6% in the same time period, a huge move but still nowhere near that of its options 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.

LOW is up 0.2% to $117.25 this afternoon. Yesterday morning Goldman Sachs added the name to its “Conviction Buy List” and raised its price target to $130 from $123 before the market opened today. The home-improvement retailer topped earnings expectations and raised its outlook on Nov. 20.