$GPS bulls turn big gains overnight

Option traders tripled their money today on upside positions opened in The Gap just one session earlier.

Investitute’s market scanners found that 2,000 November $27 calls were purchased for $1 yesterday as part of a bullish spread with shares at $26.88. This was clearly a new position, as volume was above the strike’s open interest of 1,595 contracts.

Today those calls traded for $3.01, triple their purchase price. The stock rose 11.6 percent at the same time, showing how quickly 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.

GPS jumped 6.99 percent to $29.40 today. The beaten-down clothing retailer surpassed earnings and sales projections after the market closed yesterday.