How $KR bulls tripled their money

Upside option positions in Kroger yielded significant returns today.

On Oct. 12, Investitute’s proprietary programs cited the purchase of 10,000 November $22 calls as part of a bullish roll with shares at $21.17. This was clearly a new position, as volume was well above the strike’s open interest of 6,488 contracts.

Those calls traded for $1.45 today, nearly tripling their purchase price. The stock rose 10.6 percent in the same time period, illustrating the type of leverage that can be obtained with options.

Long calls lock in the price where a 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.

KR jumped 5.07 percent to $23.41 today. This morning Wells Fargo released a bullish note on the grocery chain with a price target of $26, noting that Kroger has an improving cash flow and could buy back shares. The company is scheduled to report earnings before the market opens on Nov. 30.