$M calls rally nearly 7-fold

Bullish option positions opened in Macy’s delivered out-sized profits for traders today.

On Jan. 16, Investitute’s market scanners found that 20,000 January $25 calls were bought for $0.14 as part of a bullish spread with shares at $24.45. Volume was well above the strike’s open interest of 3,234 contracts, showing that this was a new position.

Those calls traded for as much as $0.97 today, nearly 7 times their purchase price. The stock rallied 6.13% at the same time, underscoring how quickly options can far outperform their underlying shares. Investitute co-founder Pete Najarian updated the trade on CNBC’s “Halftime Report” this afternoon.

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 rallied today to close up 4.2% at $25.79 to end the session. The department store chain has recouped some of its losses after the company cut its guidance for fiscal 2018 in conjunction with its holiday sales report.