$M bulls ring the register overnight

Bullish option traders are seeing exponential gains on their upside positions in Macy’s (M) today.

Just yesterday morning, on Aug. 17, Market Rebellion’s Unusual Activity Service detected the purchase of 17,000 Weekly $21 calls, expiring next Friday, for $0.33 to $0.43 with shares at $18.38. Open interest in the strike was just 790 contracts before that session began, showing that this was fresh buying.

Those calls traded for as much as $1.77 today, at least 4 times their purchase prices.  The stock rose 20.46% 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.

M closed today up by 19.52% at $21.61. The department-store operator topped earnings and guidance in the pre-market.