Bulls ring up large profits in $CONN

Conn’s has ripped higher this month, and option traders have taken advantage of the move.

On Sept. 1, Investitute’s proprietary programs cited the purchase of 2,500 January $20 calls for $2.40 to $2.75 with shares at $18.75. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,001 contracts.

Those calls traded for $8.39 this morning, 3.5 times its original purchase price. The stock has soared nearly 49 percent in the same period, a huge move but still far less than that of its options on a comparative 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.

CONN surged 9.75 percent to $28.15. The department-store operator spiked higher this morning after Oppenheimer upgraded the stock to “outperform” from “perform” with a $40 price target.