Bulls post huge gains in Nordstrom

Upside positions saw exponential returns today on Nordstrom’s exploration of going private.

On May 15, Investitute’s proprietary programs found that 10,000 June $45 calls were purchased mostly for $0.65 with shares at $42.44. This was clearly new positioning, as open interest in the strike was only 1,277 contracts before the activity appeared.

This morning those calls traded for $3.20 as JWN peaked right after the open, representing profits just shy of 400 percent. The stock was up less than 12.5 percent in the same period, underscoring the powerful leverage that can be achieved with options.

Long calls lock in the price where the 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.

JWN surged 10.25 percent today to close at $44.63 but rose near $48 in early trading. The upscale department-store operator, which has seen its stock hammered along with other mall retailers, announced this morning that management was considering the possibility of taking itself private.