$GWW call buyers turn quick profits

W.W. Grainger surged on strong quarterly numbers today, returning huge gains on bullish option positions opened just at the end of last week.

Last Friday afternoon, Investitute’s market scanners identified the purchase of 2,000 November $180 calls for $8.60 as part of a bullish roll with shares at $180.60, the third bullish trade in four days detected by our systems at that time. This was clearly a new position, as open interest in the strike was only 115 contracts before the activity appeared.

Those calls sold for $25.60 late this afternoon, triple their original purchase price. The stock rallied 14.6 percent at the same time, showing how quickly options can far outpace gains in their underlying shares.

It was the second winning trade in Grainger posted on Investitute in the last few days, following repeated bullish option activity in the last week. Investitute co-founder Jon Najarian cited even more call buying in the name on CNBC’s “Halftime Report” this afternoon.

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.

GWW jumped 12.65 percent to $205.42 today. The maintenance and repair supply company beat third-quarter earnings estimates and raised its outlook before the market opened.