$BAC option bulls withdraw big profits

Big gains were banked today by bullish option traders in Bank of America (BAC).

On Aug. 6, Market Rebellion’s Unusual Activity programs detected the the purchase 12,000 Weekly $40 calls, expiring this Friday, for $0.29 to $0.50 with shares at $39.56. Open interest in the contract before the trade occurred was just 5,951, showing that this was a new position.

Those calls have traded for as much as $2.20 today, more than 5 times their purchase prices. The stock rose 6.6% 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 closed the session higher by 1.23% at $41.95.