$RH call prices skyrocket 9-fold

Furniture retailer RH soared to all-time highs today on strong quarterly results, handing enormous gains to upside options traders.

On June 5, Investitute’s tracking systems detected the purchase of 5,000 June $110 calls for $5.75 as part of a bullish spread with shares at $105.63. This was clearly a new position, as open interest in the strike was only 147 contracts before the trade occurred.

Those calls sold for $50.76 today, about 9 times their purchase price. The stock surged 52.2% in the same time frame, a huge move but still nowhere near that of its options on a relative basis. Investitute co-founder Jon Najarian discussed winning trades in RH on CNBC’s “Halftime Report” this afternoon.

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 spiked higher by 30.55% today to close at $155 after reaching a lifetime high of $164.49 in the morning. The company, formerly named Restoration Hardware, beat earnings expectations and raised its outlook after the market closed yesterday.