$LRN bulls earn profits

Bullish option traders are earning fast profits today in K12 (LRN) calls.

Just yesterday on Oct. 26, Market Rebellion’s Unusual Activity Scanners found that 3,500 November $29 calls were bought for $2.70 as part of a bullish spread with shares at $28.30. This was clearly fresh buying, as open interest in the strike was only 94 contracts before that session began.

Those calls have traded for as much as $5.38 so far today, just shy of double their purchase price. The stock rose 17.46% in the same time frame, a large move but 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.

LRN was last up 7.83% to $30.44. The education company that sells online schooling and curricula topped earnings estimates on its top and bottom lines after the closing bell yesterday.