$TOL bulls turn quick gains

It took just two sessions for option traders to double their money on upside positions in Toll Brothers (TOL).

On Sept. 24, our tracking systems found that 2,800 Weekly $40 calls expiring on Oct. 4 were bought for $0.55 to $0.90 above open interest of 53 contracts with shares at $39.87. Market Rebellion co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report” and updated the position today.

Those calls traded for as much as $1.25 this morning, more than twice their initial purchase price. The stock rose 2.51% in the same time frame, showing how quickly options can far outpace gains in their underlying shares.

It is the second winning trade in the name posted on Market Rebellion since Sept. 17.

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.

TOL is up 0.46% to $40.56 this afternoon. The company, which develops luxury houses, has been catching up to builders that produce lower-priced homes as the space has rallied sharply this year.