How $KSS calls rocketed 21-fold

Option traders collected enormous profits on bullish positions in Kohl’s just before they expired yesterday.

On Nov. 30, Investitute’s proprietary programs cited the purchase of 5,000 January $55 calls for $0.57 to $0.65 with shares at $49.24. These were clearly new positions, as open interest in the strike was only 291 contracts before the activity appeared.

Those calls sold for $12.43 yesterday afternoon, more than 21 times their original purchase price. The stock surged 36.9 percent at the same time, a large move but nowhere near that of its options.

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.

KSS popped 4.15 percent yesterday to close at $67.54. Kohl’s reported 6.9 percent same-store sales in the holiday-shopping period, making it the top gainer among department-store operators.