Why call prices tripled in $W

Bullish option traders posted quick profits on Wayfair today.

On April 13, Investitute’s proprietary programs found that 2,100 Weekly $68 calls expiring this Friday were purchased for $1.50 to $2.10 with shares at $66.69. This was clearly fresh buying, as open interest in the strike was a mere 7 contracts before that session began.

Those calls traded for $4.80 today, more than 3 times their original purchase price. The stock rose 8.4% in the same time frame, 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.

W jumped 4.88% to $73.24 today. The online furniture retailer is taking market share from struggling Pier 1 Imports, which plunged on poor quarterly results last week. Wayfair is scheduled to report earnings on May 2 before the market opens.