Bulls turn quick profit on Coach

Traders won big on Coach earnings just one day after opening bullish positions.

Investitute’s proprietary systems detected the purchase of 11,500 June $40 calls for $1.05 to $1.25 with shares at $39.10 yesterday afternoon. This was clearly fresh buying, as open interest in the strike was only 142 contracts before the activity appeared.

Those calls traded up to $3.61 today, tripling in value less than one full session later. The stock closed today at $43.15, up an impressive 11.38 percent but nowhere near the returns of the calls, underscoring the kind of leverage that can be achieved through 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.

COH gapped up at the open after announcing quarterly results in the pre-market. The upscale accessories retailer posted higher profits than expected after changing its discount strategy.