$TGT bulls triple their money

A blowout earnings report propelled upside options in Target to exponential profits today.

On July 26, Investitute’s tracking systems detected the purchase of 6,000 Weekly $81 calls expiring this Friday for $2.07 as part of a bullish spread with shares at $80.44. This was clearly a new position, as open interest in the strike was only 269 contracts before the trade occurred. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $7.45 this morning, more than 3.5 times their purchase price. The stock rose 10% at the same time, 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.

TGT closed higher by 3.21% to $85.94 today after reaching an all-time high of $88.89 earlier in the session. The retail chain reported its best sales numbers in more than 13 years this morning.