Bulls double their money in $ITB

Option traders scored big gains in the iShares U.S. Home Construction Fund today.

On Oct. 23, Investitute’s market scanners identified the purchase of 15,000 December $31 calls for $1.12 to $1.20 as part of a bullish spread with shares at $30.14. This was clearly a new position, as open interest in the strike was a mere 32 contracts before that session began.

Those calls traded for $2.40 today, at least twice their purchase prices. The stock rose 7.43% in the same time frame, showing 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.

ITB was up 3.18% to $32.16 today. The exchange-traded fund has been beaten down this year but has shown signs of improvement in recent weeks, as reflected in several bullish option trades tracked on Investitute.