$BAC bulls double their money

Option traders are booking large gains on upside positions in Bank of America today.

On Jan. 8, Investitute’s tracking systems detected the purchase of 10,100 June $24 calls for $2.60 to $2.67 with shares at $25.28. This was clearly fresh buying, as volume was far above the strike’s open interest of 2,711 contracts before that session began. Investitute co-founder Pete Najarian cited the recent wave of bullish option activity in the name on CNBC’s “Halftime Report” around that time, saying that he has been adding to long positions in BAC.

Those calls were marked at $6.08 this afternoon, more than twice their purchase prices. The stock rose 18.12% 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 climbed to a session high of $30.13 this morning before pulling back to close at $29.65, off 0.57% on the session. The bank has rallied in the last several days after holding support around the $28 level this year.