$SKX calls turn quick profits

Option traders ran up gains in Skechers USA (SKX) today ahead of quarterly results on Thursday afternoon.

On July 10, Investitute’s market scanners identified the purchase of 3,500 July $36 calls for $0.70 to $0.80 with shares at $32.64. This was clearly a new position, as open interest in the strike was only 169 contracts before the activity appeared.

Those calls sold for as much as $1.48 this morning, about twice their average purchase price. The stock rose 5.39% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

SKX is up 0.2% to $34.33 in late-morning trading. The shoe retailer is scheduled to report earnings after the market closes on July 18.