Traders ride $RCL to large gains

Bullish option traders have doubled their money in Royal Caribbean Cruises.

On Aug. 2, Investitute’s proprietary programs flagged the purchase of 4,000 December $105 calls for $7.40 to $8 as part of a bullish spread with shares at $105.78. Open interest in the strike was only 153 contracts before the trade occurred, showing that it was a new position.

Those calls traded for $16.55 today, more than double their purchase prices. The stock rose 12.44% in the same time frame, underscoring how options can far outperform 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.

RCL was up 1.44% to $118.50 today. The cruise operator has been climbing since an initial pullback after quarterly results on Aug. 2.