Call buyers triple their money in $M

Macy’s has been rebounding on turnaround efforts in recent months, and bullish option position chalked up more gains today.

Last Thursday, Investitute’s market scanners identified the purchase of 10,300 December $25 calls for $0.50 to $0.73 with shares at $24.41. This was clearly fresh buying, as volume was well above the strike’s open interest of 3,482 contracts. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls rose to $1.64 today, more than 3 times thir original purchase price. The stock rose 7.5 percent in the same time frame, illustrating the kind of leverage that can be achieved through options. It was the third bullish trade in Macy’s posted on Investitute in the last month.

Long calls lock in the price where a 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.

M jumped 6.66 percent to $25.80 today. The department-store operator rallied along with retailers on hopes that the sector will benefit from new tax legislation.