$OSTK bulls stock up on gains

Option traders who opened bullish positions in Overstock.com (OSTK) yesterday morning are stocking up on large gains today.

About 5 minutes after the opening bell yesterday, Market Rebellion’s activity scanners found that 3,400 Weekly $80 calls expiring tomorrow, Oct. 2, were bought for $0.75 to $1.10 with shares at $73.59. This was clearly new positioning, as existing open interest in the strike was only 894 contracts.

Those calls have traded for as much as $2.95, roughly 3 times their purchase prices. The stock rose 9.51% in the same time frame, showing how quickly options can far outpace gains in 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.

OSTK is up 10.24% to $80.09 in midmorning trading. The online retailer will celebrate its Customer Day on Oct. 4 this year.