$TPX bulls score in one day

Option traders doubled their money in Tempur Sealy overnight.

Just yesterday, Investitute’s market scanners identified the purchase of 2,600 May $62.50 calls for $2.25 to $2.40 with shares at $59.34. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 821 contracts.

Those calls traded for as much as $4.70 this afternoon, more than twice their average purchase price. The stock rose 7.82% 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.

TPX jumped 7.03% to $63.66 today. The mattress manufacturer rallied this morning with the resignation of Mattress Firm’s chief executive, raising hopes that Tempur Sealy will be able to distribute through the retailer again.