$BAC call prices rise three-fold

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

On Jul. 21, Market Rebellion’s Unusual Activity Service detected the purchase of 11,000 August $27.50 calls for $0.14 to $0.15 with shares at $23.85. Volume was well above the strike’s previous open interest of just 128 contracts, showing that this was a new position.

Those calls traded for as much as $0.85 today, more than 5 times their purchase prices. The stock rose 12.58% 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 1.36% to $26.92. The bank traded higher along with its peers today before pulling back modestly into the close.