Option bulls quintuple their money in $KSS

It took just over a month of trade for option traders to double their money on upside positions in Kohl’s (KSS).

On Oct. 1 and Oct. 5, Market Rebellion’s Unusual Activity Service found that a collective 15,000 November $57.50 calls were bought for $0.76 to $0.97 as part of a bullish spread with shares at $47.08 to $48.91. This was clearly fresh buying, as open interest in the strike at the outset was only 910 contracts before the activity appeared.

Those calls sold for as much as $4.95 today so far, more than 5 times their purchase prices. The stock rose 32.5% in the same time frame, showing how quickly 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.

KSS was up by 10.47% to close at $62.48 this afternoon.