$ROST calls gain 465% in four days

It took less than a week for bullish traders to post huge gains in option positions on Ross Stores.

On Tuesday, Investitutes proprietary programs cited the purchase of 5,000 August $55 calls for $0.75 and $0.80 as part of a bullish spread with shares at $52.87. This was clearly new positioning, as volume was well above the strike’s open interest of 3,834 contracts.

Those calls traded for $4.40 today, an average gain of more than 465 percent. The stock rose 12.4 percent in the same time frame, underscoring how quickly options can far outpace 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.

ROST jumped 10.67 percent today to close at $59.02. The discount retailer raised its outlook after beating quarterly estimates on the top and bottom lines after yesterday’s close.