$COST bulls post astronomic gains

Option traders reaped enormous profits in Costco today thanks to strong quarterly results.

On Nov. 9, Investitute’s tracking systems detected the purchase of 3,800 December $180 calls for $0.68 to $0.83 with shares at $168.65. These were clearly new positions, as open interest in the strike was only 902 contracts before the activity appeared.

Those calls sold for $15.31 before expiring today, 22.5 times their original purchase price. The stock rose 15.8 percent in the same time period, underscoring how options can far outperform 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.

COST popped 3.32 percent to $192.73 today. The warehouse wholesaler beat estimates on the top and bottom lines after the market closed yesterday, reporting a 10.5 increase in same-store sales.