Dick’s Sporting Goods rebounded sharply today, handing large returns on bullish option positions opened just last week.
On Nov. 6, Investitute’s proprietary programs cited the purchase of 3,600 November $25 calls for $1 to $1.50 with shares at $24.65. This was clearly fresh buying, as open interest in the strike was only 259 contracts before that session began.
Those calls traded for $2.06 today, more than double their original purchase price. The stock rose 9.7 percent at the same time, illustrating the kind of leverage that can be achieved through options.
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.
DKS jumped 4.96 percent to $26.86 today, one session after falling despite beating earnings estimates. The sporting-goods retailer was upgraded this morning to “overweight” from “neutral” at JP Morgan, giving the name a $32 price target while calling the company “a long-term survivor.”