Calls increase sixfold as $FL soars

Option traders are reaping major rewards today on bullish bets placed on Foot Locker earlier this week.

On Monday, Investitute’s market scanners identified the purchase of 2,000 November $31 calls for $1.57 as part of a bullish spread with shares at $30.42. This was clearly a new position, as volume was above the strike’s open interest of 1,383 contracts.

Those calls traded up to $10.63 this morning, more than 6.5 times their purchase price. The stock surged 34.9 percent in the same time frame, a huge move but nowhere near that of its options on a relative basis. Investitute co-founder Pete Najarian discussed the rally in Foot Locker on CNBC’s “Halftime Report” this afternoon.

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.

FL rocketed 28.16 percent to $40.82 today. The shoe retailer beat quarterly results and raised guidance this morning.