$TAL option bulls triple money

TAL Education (TAL) is up sharply today, delivering big gains to upside option traders.

Just a week ago, on Oct. 5, Market Rebellion’s Unusual Activity Service identified the purchase of 10,000 November $7.50 calls for $0.15 with shares at $4.39. This was clearly fresh buying, as open interest in the strike was only 5,419 contracts before the activity appeared.

Those calls have traded up to $0.50 this session, about 3 times their purchase prices. The stock rose 19.59% 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.

TAL was last up by 5.14% to $5.66 this morning.