Bulls bank profits in $BAC

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

On Sep. 24, Market Rebellion’s Unusual Activity Service detected the purchase of 5,000 Weekly $25 calls, expiring on Oct. 30, for $0.53 to $0.54 with shares at $23.14. Volume was well above the strike’s previous open interest of just 673 contracts, showing that this was a new position.

Those calls have traded for as much as $1.18 today, more than 5 times their purchase prices. The stock rose 10.59% 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 was last lower on the session by 3.04% at $24.90. The bank is scheduled to report earnings tomorrow Oct. 14, before the opening bell.