Game on for gains in $GME

Option traders posted big gains on upside positions in GameStop (GME) today.

On Dec. 23Market Rebellion’s Unusual Activity Service found that 5,000 February $22 calls were bought as part of a complex bullish spread for $3.79 with shares at $20.87. Volume was well above the strike’s open interest of 238 contracts, indicating that this was clearly fresh buying.

Those calls have traded for as much as $51.80 today, more than 13.5 times their purchase price. The stock rallied by as much as 267.8% at the same time, a huge move but nothing like that of its options on a relative basis.

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.

GME ended up 51.08% to $65.01 today. Last week it was announced that Chewy (CHWY) co-founder Ryan Cohen would be joining the retailer’s board.