$RCL calls soar 7-fold in a week

Bullish option traders turned exponential gains in Royal Caribbean today.

On June 6, Investitute’s tracking systems detected the purchase of 2,500 July 110 calls bought for 0.95 to 1.22 with shares at $103.42. This was clearly fresh buying, as open interest in the strike was only 364 contracts before the activity appeared.

Those calls traded for $7.06 today, more than 7 times their initial purchase price. The stock rose 10.8% in the same time frame, showing how quickly options can far outperform their underlying shares. Investitute co-founder Jon Najarian discussed the move today on CNBC’s “Halftime Report.”

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.

RCL jumped 5.11% today to close at $113.50. The cruise-line operator announced this morning that it is taking a controlling, 66.7% stake in Silverseas Cruises for $1 billion.