Hefty gains from Weight Watchers

Traders chalked up enormous profits after Weight Watchers announced strong quarterly results this morning.

On April 19, Investitute’s tracking systems found that 3,000 May $18 were bought mostly for $1.40 with shares at $17.65. Open interest in the strike was only 281 contracts before the activity appeared, showing that this was new positioning.

Today those calls traded up to $6.81, nearly 5 times their purchase price. The stock surged 31.2 percent in the same time frame, but that still paled in comparison to the exponential gains of the calls–underscoring the kind of leverage that can achieved through options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares.

WTW rose 9.3 percent to finish today at $23.16. The weight-loss program company reported earnings and revenues that exceeded expectations after yesterday’s close.