$MIK earnings yield big returns for calls

Michaels Companies painted a rosy picture for bullish option traders today.

On Monday, Investitute’s market scanners identified the purchase of 3,600 September $20 calls for $0.70 with shares at $19.54. This was clearly fresh buying, as volume was more than double the strike’s open interest of 1,436 contracts.

This morning those calls sold for $4, a gain of more than 470 percent in less than a week. The stock rose 23.3 percent in the same time frame, a large move but nowhere near that of the options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

MIK spiked to a 52-week high of $24.24 at the open today and closed at $21.27, up 8.47 percent. The arts-and-crafts retailer surpassed estimates on the top and bottom lines this morning.