$WMT calls prices rocket 20-fold

Walmart’s blowout earnings report this morning resulted in big gains for upside option positions opened just one day earlier.

Yesterday afternoon, Investitute’s market scanners identified the purchase of 4,600 August $97 calls for $0.13 to $0.18 with shares at $90. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,889 contracts.

Those calls traded up to $3.33 this morning, more than 21 times their average purchase price. The stock rose 11.24% at the same time, showing how quickly 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.

WMT surged 9.33% to $98.64 today. The retail giant beat expectations on the top and bottom lines while raising its outlook before the market opened.