$BK call prices double

Bank of New York Mellon ($BK) rose this session, delivering solid returns on bullish upside option positions opened Friday.

On Dec. 18, Market Rebellion’s Unusual Activity Service identified the purchase of 5,700 Weekly $42 calls, expiring this Thursday, for $0.20 to $0.30 with shares at $40.80. This was clearly fresh buying, as open interest in the strike was just 140 contracts before the activity appeared.

Those calls traded for $0.68 today, more than twice their purchase price. The stock rose 3.14% in the same time frame, underscoring how quickly options can far outperform moves in 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.

BK was up to close higher by 1.54% at $41.42 on the day. The regional bank announced Friday after the close that it would resume its share buyback program in 1Q21.