Bulls take $BAC to the bank again

Option traders more than tripled their money in Bank of America today.

On Jan. 16, Investitute’s tracking systems found that 20,000 Weekly $28.50 calls expiring on Jan. 25 were purchased for $0.28 to $0.30 with shares at $28.13. This was clearly fresh buying, as open interest in the strike was only 751 contracts before the activity appeared. Investitute co-founder Pete Najarian cited the recent wave of bullish option activity in BAC on CNBC’s “Halftime Report” yesterday, saying that he has been adding to long positions in the bank.

Those calls traded up to $1.05 today, at least 3.5 times their purchase prices. The stock rose 4.73% in the same time frame, underscoring how quickly options can far outperform their underlying shares. It was the second winning trade in the name posted on Investitute in the last three sessions.

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 up 1.07% to $29.30 today. The bank reported record quarterly results before the market opened Wednesday morning.