$RH calls double for patient bulls

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

On Sep. 7, 2018, Market Rebellion’s Unusual Option Activity Service identified the purchase of 2,000 January $160 calls for $18.10 to $18.90 with shares at $129.93. This represented fresh buying, as volume was well above the strike’s previous open interest of 193 contracts.

Those calls sold for $50.90 today, at least double their purchase prices. The stock rose 62.31% 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 closed up 3.75% at $215.51 today. The furniture retailer’s shares have risen sharply since lows made in the middle of last year.