Bulls score huge gains in $AMBC

Ambac Financial has ripped higher in recent weeks, yielding exponential profits on upside option positions.

On March 20, Investitute’s proprietary programs flagged the purchase of 3,000 May $15 calls for $0.65. The trade was part of a bullish call spread with shares at $14.14.

Those calls traded for $3.30 today, 5 times their purchase price. The stock rallied 27.9% in the same time period, a large move but nowhere near that of its options.

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.

AMBC spiked higher at today’s open but pulled back with the broader market to end the session off 1% at $17.76. The financial services company will hold its annual shareholders meeting on May 18.