$KSS traders score on Amazon deal

Bullish option positions posted big gains today as Kohl’s surged on a new partnership with Amazon.com.

On Aug. 10, Investitute’s market scanners identified the purchase of 6,600 September $37.50 calls for $2.60 to $3 with shares at $39.51. These were clearly new positions, as open interest in the strike was just 158 contracts before the activity appeared.

Those calls traded up to $5.20 today, doubling in value. The stock rose 8 percent in the same time, showing how options can far outpace gains in their underlying shares.

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 jumped 4.9 percent to $42.37 today. The stock rallied on news that Amazon will sell its Echo device and other “smart home” products in the retailer’s stores.