$PLAY calls quadruple overnight

Last-minute option trades yesterday led to huge gains just hours later when Dave & Buster’s reported strong quarterly results.

Minutes before yesterday’s closing bell, Investitute’s market scanners identified the purchase of 2,700 June $47.50 calls for $2.05 to $2.55 with shares at $47.89. This was clearly fresh buying, as open interest in the strike was only 500 contracts before the activity appeared.

Those calls traded for $8 this morning, just shy of 4 times their initial purchase price. The stock rose 15.9% at the same time, 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.

PLAY surged 16.7% to $55.82 today. The entertainment and restaurant chain rallied last night after topped estimates on the top and bottom lines while announcing that its chief financial officer will become the company’s new CEO.