$TGT call buyers ring up big gains

Option traders have tripled their money on upside positions opened in Target at the height of holiday shopping.

On Nov. 29, Investitute’s market scanners identified the purchase of 16,000 March $62.50 calls for $2.49 as part of a bullish roll with shares at $59.72. This was clearly a new position, as open interest in the strike was only 147 contracts before the trade occurred.

Those calls traded for $8.15 this afternoon, more than 3 times their purchase price. Stock 69.93. The stock rallied 17.1 percent in the same time, underscoring how options can far outperform 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.

TGT was up 2.92 percent to $69.14 today. The retail chain raised its earnings and revenue outlook after strong holiday sales, leading Bank of America to raise its price target for the name to $86 from $72.