$RAD bulls prescribed profits

Bullish option traders were prescribed profits on upside positions in Rite Aid (RAD) today.

On Nov. 18, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 5,000 Weekly $13 calls, expiring Dec. 31, for $0.55 as part of a bullish spread with shares at $10.97. Volume was above the strike’s existing open interest of 44 contracts, indicating that this was fresh buying.

Those calls ended the session marked for $6.90, over 12.5 times their purchase prices. The stock rose 83.04% in the same time frame, underscoring how quickly 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.

RAD was up 17.36% at $20.08 at the close. The drugstore chain topped earnings expectations this morning during its quarterly report.