$WSM call buyers ring up profits

Bullish option traders doubled their money in Williams-Sonoma today, thanks to a strong earnings report.

On Feb. 9, Investitute’s market scanners identified the purchase of 3,000 March $52.50 calls for $1.90 as part of a bullish spread with shares at $50.48. Open interest in the strike was only 300 contracts before the trade occurred, showing that it was a new position.

Those calls sold for $3.70 this morning, twice their purchase price. The stock 11.4% in the same time period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

WSM was up 2.48% to $55.02 today. The cooking-products and furniture retailer topped quarterly estimates and raised its outlook after the market closed yesterday.