Traders capitalize on $TGT swings

Nimble option traders posted enormous profits in bullish positions on Target today, just one session after scoring huge gains in the opposite

On Wednesday, Investitute’s tracking systems showed that 9,500 November $56 calls were sold early but then mostly bought for $0.11 to $0.21 with shares at $54.85. These were clearly new positions, as open interest in the strike was a mere 14 contracts before that session began.

Those calls ended today’s session trading for $2.71, more than 25 times their original purchase price. The stock rose 7 percent in the same time, showing how quickly 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 jumped 5.52 percent to $58.14 today, just one session after gapping down from the $60 level on disappointing guidance. The stock rebounded as other struggling retailers rallied on positive quarterly results, raising hopes that the ailing sector may be turning around.

Investitute co-founder Jon Najarian discussed Target’s gyrations on CNBC’s “Halftime Report.”