How $BBBY calls surged sevenfold

Bullish option traders racked up exponential profits in Bed Bath & Beyond today.

On Nov. 14, Investitute’s proprietary programs cited the purchase of 4,200 December $20 calls for $0.60 to $0.82 with shares at $19.90. These were clearly new positions, as open interest in the strike was only 1,294 contracts before the activity appeared.

Those calls traded up to $4.45 today, more than 7 times their original purchase price. The stock rallied 22.7 percent in the same time period, a large move but nowhere near that of its options. Investitute co-founder Jon Najarian has cited upside option activity in Bed Bath & Beyond repeatedly on CNBC.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

BBBY jumped 8.83 percent to $24.40 today as retailers rallied on expected benefits from the pending tax bill. The home-products chain is scheduled to report earnings on Dec. 20 after the market closes.