Lululemon: Downward dog no more

Bullish option traders made fast money on Lululemon’s strong quarterly results.

Just yesterday, Investitute’s tracking systems showed that 2,000 Weekly $51 calls that expired this afternoon were purchased for $1.53 and $1.54 with shares at $48.77. This was clearly a new position, as open interest in the strike was only 329 contracts before the trade occurred.

Those calls traded as high as $6 this morning, a gain of nearly 300 percent in 24 hours. The stock rose less than 15.8 percent in the same time, underscoring how far and quickly options can outperform 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.

LULU surged 11.55 percent today to close at $54.29. The athletic-apparel retailer surpassed earnings and revenue expectations yesterday afternoon.