Patient bulls score in $DKS at highs

Bullish option positions opened late last year scored stratospheric gains after Dick’s Sporting Goods (DKS) reported strong quarterly numbers this week.

On Dec. 23, 2020, Market Rebellion’s Unusual Activity programs detected the the purchase 5,000 January 2022 $60 calls for $7.65 with shares at $55.68. Open interest in the contract before the trade occurred was just 2,245, showing that this was a new position.

Those calls have traded for up to $76 today, just shy of 10 times their purchase price. The stock rose 144.29% 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.

DKS closed higher by 2.55% to $138.50 today, setting a new all-time closing high for the fifth day in a row. The sporting-goods retailer topped quarterly estimates and raised its outlook before the market opened on Wednesday, while also announcing a $5.50 special dividend.