$PZZA delivers for the bulls

Upside option traders have more than doubled their money in Papa John’s.

On Aug. 9, Investitute’s proprietary programs cited the purchase of 5,250 October $45 calls for $1.25 to $1.40 with shares at $39.73. These were clearly new positions, as open interest in the strike was only 435 contracts before the trades occurred. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $3.30 today, about 2.5 times their purchase prices. The stock rose 18.07% in the same time period, illustrating how 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.

PZZA slipped 0.3% today to close at $46.84. The pizza chain has been climbing back from four-year lows reached in early August.