$DSW call prices double in a day

It took only one session for option traders to turn significant gains in DSW.

On Friday, Investitute’s tracking systems detected the purchase of 6,200 February $22.50 calls for $0.35 to $0.60 with shares at $21.48. These were clearly new positions, as open interest in the strike was only 209 contracts before the activity appeared. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $0.95 this morning, more than 2.5 times their original purchase price. The stock rose 2% at the same time, showing how quickly options can 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.

DSW was up 1.1% to $22 today. The discount-shoe chain has rallied this year as retailers rebounded with strong holiday sales.