$BAC bulls bank fast profits

Bank of America (BAC) traded sharply higher today, delivering fast gains to bullish option traders.

Yesterday on Jun. 2, Market Rebellion’s Unusual Activity Service detected the purchase of 18,500 Weekly $25.50 calls, expiring this Friday, Jun. 5, for $0.30 to $0.37 with shares at $25.06. Volume was well above the strike’s previous open interest of just 12,703 contracts, showing that this was a new position.

Those calls traded for as much as $0.69 today, about double their purchase prices. The stock rose 4.11% in the same time period, 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.

BAC ended higher on the session by 4.61% to $25.99. The bank traded higher along with the rest of the market after the Automatic Data Processing (ADP) private payrolls report showed a decrease of 2.76 million jobs in May, well below the expectations of some analysts.