Bulls double their money in $C

Citigroup proved doubters wrong after releasing its quarterly results, and option traders are reaping the rewards.

On Dec. 13, Investitute’s tracking systems detected the purchase of 20,000 February $60 calls for $1.24 to $1.46 as part of a bullish roll with shares at $56.20. Open interest in the strike was only 2,211 contracts before the trade occurred, showing that it was a new position. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $2.75 by midday, more than twice their average purchase price. The stock rose 9.96% at the same time, 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.

C jumped 4.16% to close at $61.38 this afternoon. The bank initially fell after reporting earnings in the pre-market yesterday but reversed higher and continued rallying today.