$M bulls triple their money overnight

Macy’s proved skeptics wrong by beating earnings estimates this morning, returning sizable profits on option positions opened just one session earlier.

Yesterday Investitute’s tracking systems detected the purchase of 20,000 November $18 calls for $0.75 as part of a bullish spread with shares at $17.49. This was clearly fresh buying, as open interest in the strike was only 2,392 contracts before the trade occurred. On CNBC’s “Fast Money” program last night, Investitute co-founder Pete Najarian said the volume was so compelling that it lured him into the trade.

Those calls sold for $2.05 today, nearly 3 times their purchase price. The stock rose 14.7 percent at the same time, showing how quickly 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.

M jumped 10.98 percent today to close at $19.50. The struggling retailer topped forecasts for the bottom line before the market opened.