$RL bulls quadruple their money

It took less than a week for option traders to collect huge profits in Ralph Lauren.

Last Thursday, Investitute’s tracking systems detected the purchase of 2,000 June $115 calls for $4.80 as part of a bullish spread with shares at $114.43. This was clearly fresh buying, as open interest in the strike was only 855 contracts before the activity appeared. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $21.60 today, 4.5 times their purchase price. The stock rose 19.2% in the same time frame, showing how quickly options can far outpace gains in 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.

RL spiked higher by 14.3% today to close at $133.33 after reaching a 52-week high of $136.43 earlier in the session. The high-end retailer exceeded expectations on the top and bottom lines this morning.