Tempur Sealy bulls on cloud nine

Upside option positions reaped exponential gains on Tempur Sealy’s strong quarterly results today.

On June 2, Investitute’s proprietary programs cited the purchase of 3,250 September $50 calls for $3.50 as part of a bullish roll with shares at $47.72. The volume was above the strike’s open interest of 2,926 contracts, showing that it is a new position.

Those calls traded up to $14.10 today, representing a profit of more than 300 percent. The stock rallied 33.1 percent in the same time frame, a large gain but still one that paled in comparison to that of the options. It was the Tempur Sealy’s second winning trade in less than a month.

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.

TPX finished today at $61.40 after reaching a high of $63.98 in the morning. The mattress manufacturer beat earnings estimates and raised its outlook before the market opened.

(Disclosure: I am long TPX.)