Upside option positions posted big profits as Michael Kors rallied today.
On Nov. 28, Investitute’s proprietary programs flagged the purchase of 5,000 February $60 calls for $2.50 as part of a bullish spread with shares at $57.18. This was clearly a new position, as volume was well above the strike’s open interest of 1,243 contracts.
Those calls traded for $5.17 today, more than double their purchase price. The stock rose less than 8.3 percent in the same time frame, illustrating the type of leverage that can be obtained with options.
Long calls lock in the price where a 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.
KORS was up 3.1 percent to $61.81 today. The upscale handbag and apparel company rallied along with other high-end retailers as it tries to limit discounting and improve its image of exclusivity.