Call buyers making bank in $KRE

Option traders have tripled their money in the SPDR S&P Regional Banking Fund.

On Jan. 8, Investitute’s tracking systems detected the purchase of 10,000 February $62 calls for $0.62 as part of a bullish spread with shares at $59.39. This was clearly a new position, as open interest in the strike was only 943 contracts before that session began. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $1.85 yesterday, 3 times their purchase price. The stock rose 6.2% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

KRE was up 0.25% yesterday to close at $63.06. The exchange-traded fund has been grinding higher this month with other financials on the prospects of tax reform and higher interest rates.