$URBN bulls triple their money

Urban Outfitters initially drew mixed reactions to quarterly numbers, but in the end it paid off nicely for upside option positions.

On Oct. 27, Investitute’s market scanners found that 3,000 Weekly $26 calls expiring this Friday were purchased in one print for $1.20 with shares at $24.54. Open interest in the the strike was a mere 3 contracts before the trade occurred, showing that this was a new position.

Those calls traded up to $3.70 this morning, more than 3 times their purchase price. The stock rallied 22.1 percent in the same time frame, an impressive gain but 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.

URBN was up 3.71 percent to $29.32 today. The mall retailer beat earnings and revenue estimates after the market closed yesterday.