$RH call buyers double their money overnight

RH (RH) calls delivered a big return for bullish option traders today.

On Nov. 20, Market Rebellion’s Unusual Option Activity Service identified the purchase of 3,300 Weekly $190 calls expiring tomorrow, Nov. 22, for $1.67 to $4.00 with shares at $191.38. This represented fresh buying, as volume was well above the strike’s previous open interest of 913 contracts.

Those calls have traded for as much as $8.40 today, at least double their purchase prices. The stock rose 3.41% in the same time frame, a large overnight move but still far below that of their options on a relative basis.

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.

RH is up to $197.01 or 3.78% this morning. The furniture retailer was added to the portfolio of Warren Buffett’s Berkshire Hathaway as of its last Form 13F for the period ended Sept. 30.