Wikimedia

Bullish option traders scored exponential gains in Spirit Airlines Inc.  (SAVE) Tuesday.

On September 20, Investitute's market scanners identified the purchase of 1,000 January $50 calls for $3.20 as part of a bullish spread with shares at $48.53. Volume was above the strike's open interest of 938 contracts, showing that it was a new position.

With oil trending near highs not seen in years at the time, these investors may have believed that shares of SAVE, among other airlines, had the potential to rise should energy prices correct. By purchasing those January $50 calls, the investors were able to risk only 6.6% of the spot price of SAVE shares, giving them the opportunity to see their thesis play out, with a four-month horizon, and a known, protected stop-loss.

Those January $50 calls traded up to $12.70 Tuesday, November 27, about 4 times their purchase price. The stock rose 27.67% in the same time period, a large move but nowhere near that of its options on a relative basis.

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.

Spirit Airlines spiked higher by 15.26% to $58.76 on Tuesday. The discount airline rallied after raising its revenue outlook.

More from Options

Market Movers: January FOMC Meeting

Market Movers: January FOMC Meeting

Novice Trade: Walmart

Novice Trade: Walmart

This Is Not Your Grandpa's Covered Call Strategy

This Is Not Your Grandpa's Covered Call Strategy

Resiliency Has Been the Biggest Trend for Xilinx Stock

Resiliency Has Been the Biggest Trend for Xilinx Stock

Comcast Stock Has Sure Caught My Attention

Comcast Stock Has Sure Caught My Attention