Option traders scored big gains overnight in L Brands.
Just yesterday, Investitute’s proprietary programs cited the purchase of 4,800 November $47.50 calls at the same second for $0.85 with shares at $44.21. Volume was well above the strike’s open interest of 3,097 contracts, showing that this was a new position. Investitute co-founder Jon Najarian cited the unusual activity in the afternoon on CNBC’s “Halftime Report.”
Those calls traded for $2.35 today, nearly tripling in value. The stock rose just 1.7 percent at the same time, illustrating the kind of leverage than be achieved through options.
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.
LB jumped 8 percent today to close at $47.10. The apparel retailer, which will announce third-quarter earnings after the close on Nov. 15, reporting strong same-store sales growth yesterday.