Calls ring up enormous gains in $KR

Kroger reported unexpectedly strong numbers this morning, handing exponential gains to bullish option traders after just four sessions.

On Monday, Investitute’s proprietary programs cited the purchase of 6,100 December $24 calls for $0.55 to $0.65 with shares at $23.25. Volume was well above the strike’s open interest of 4,821 contracts, indicating that this was fresh buying.

Those calls traded as high as $3.74 this morning, nearly 7 times their original purchase price. The stock rose 18.8 percent in the same time frame, an impressive move but nowhere near that of its options.

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.

KR jumped 6.07 percent today to close at $25.86, its largest one-day percentage increase in 12 years. The grocery chain beat estimates on earnings, revenue, and same-store sales before the market opened.