$SIG call prices shine

Bullish option traders are seeing their positions shine today in Signet Jewelers (SIG).

On May. 22, Market Rebellion’s Unusual Activity Service flagged the purchase of 8,700 June $12 calls for $0.70 to $1.00 with shares at $10.55. This was clearly fresh buying, as open interest in the strike was just a mere 1,083 contracts before that session began.

Those calls traded as high as $2.90 today, more than 3 times their average purchase price. The stock rallied 35.83% at the same time, a huge move but still nowhere near that of its 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.

SIG ended this session up 26.28% to $14.27. The jewelry retailer’s sales and earnings estimates were raised at Northcoast this morning.