$TITN calls soar fivefold overnight

Option traders racked up huge gains in Titan Machinery today, only one session after opening bullish positions in the name.

Just yesterday, Investitute’s market scanners identified the purchase of 2,000 April $20 calls for $1 as part of a bullish spread with shares at $19.59. Open interest in the strike was only 23 contracts before the trade occurred, showing that it was a new position.

Those calls traded for as much as $5.20 today, more than 5 times their purchase price. The stock rallied 28.1% at the same time, 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.

TITN spiked higher by 19.29% today to close at $23.56. The agricultural and construction equipment company topped earnings and revenue projections this morning.