Call buyers post 675% profit in Kors

Michael Kors rallied sharply on strong quarterly results, handing exponential gains to bullish option traders.

On July 14, Investitute’s tracking systems detected the purchase of 3,700 August $35 calls for $1.30 to $1.45 with shares at $34.01. Volume was well above the strike’s open interest of 2,145 contracts, indicating that this was fresh buying.

Those calls sold for $10.70 today, an average gain of more than 675 percent. The stock surged 34.3 percent in the same time frame, a huge move but still nowhere near that of the 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 themselves.

KORS jumped 21.54 percent to close at $45.25 today. The luxury fashion retailer beat quarterly estimates and raised its full-year outlook.