Upside option traders are making big profits in The Gap (GPS) today.
Those calls have traded for up to $0.55 today, a 205.56% return, while the stock rose 8.22% in the same time frame, showing how quickly options can far 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.
GPS closed at $9.92, up 7.71% on the day.