$C call buyers see gains

Option traders have turned big gains in upside positions on Citigroup Inc (C).

On Nov. 20, Market Rebellion’s Unusual Option Activity Service found that 12,200 December $46 calls were bought for $0.87 to $1.16 with shares at $45.23. This was clearly fresh buying, as open interest in the contract was just 7,890 before the activity appeared.

Those calls have traded for as much as $5.15 today, a 343.97% return, while the stock rose 13.18% at the same time, 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.

C was last higher on the day by 1.93% at $50.30.