Traders build large gains in $HDS

Upside option positions opened in HD Supply this summer turned big profits today thanks to strong quarterly results.

Back on July 14, Investitute’s tracking systems cited the purchase of 2,500 December $32.50 calls for $2.10 as part of a bullish combination trade. Shares were marked at $30.61 at that time.

Those calls sold for as much as $7.40 today, more than 3.5 times their purchase price. The stock rallied 30.2 percent in the same time period, a large move but on that was still far below that of its options on a relative basis.

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.

HD jumped 6.33 percent to $38.80 today. The industrial building-supply company topped expectations on the top and bottom lines this morning.