Bulls rack up quick profits in $EFA

Option traders have quadrupled their money barely a week after opening bullish positions in the global iShares MSCI EAFE Fund.

On Jan. 17, Investitute’s market scanners found that 11,100 February $75 calls were purchased mostly in one print of 8,500 for $0.21 as part of a bullish spread with shares at $73.63. This was clearly fresh buying, as volume was double the strike’s open interest of 5,524 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $0.88 yesterday, more than 4 times their purchase price. The stock rose 2.2 percent in the same time frame, 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.

EFA was up 0.88% to close at $75.25 yesterday. The exchange-traded fund, which tracks developed markets outside of the United States and Canada, has rallied since the end of last year with the global recovery.