It took just 48 hours for option traders to triple their money in Darden Restaurants.
On Monday, Investitute’s market scanners identified the purchase of 3,000 January $90 calls for $2.20 as part of a bullish spread with shares at $89.44. This was clearly a new position, as open interest in the strike was only 538 contracts before the trade occurred.
Those calls rose to $8.20 this morning, more than 3.5 times their purchase price. The stock gained 9.5 percent in the same time frame, underscoring how quickly options can far outpace gains in their underlying shares.
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.
DRI reached a new 52-week high of $98.29 early this morning but pulled back to close at $95.67, down 1.05 percent on the session. The restaurant chain raised its outlook yesterday after earnings and sales beat estimates.