$M calls soar eightfold in 4 days

Option traders who bought Macy’s on Black Friday got early holiday gifts today.

On Nov. 24, Investitute’s tracking systems showed that 2,200 Weekly $22 calls expiring this Friday were purchased for $0.27 to $0.39 with shares at $21.48. Volume was double the strike’s open interest, indicating that this was fresh buying.

Those calls traded for $2.14 today, about 8 times their original purchase price. The stock rose 12.3 percent in the same time frame, underscoring 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 8.16 percent to $23.98. The department-store operator rallied along with other beaten-down retailers as early sales numbers showed that the malls are far from dead this shopping season.