Call buyers triple their money in $EWZ

Bullish option positions opened in the middle of September in the iShares MSCI Brazil Fund have tripled as investors take on a bullish outlook for the future of the Brazilian economy.

On September 18, Investitute’s tracking systems showed that 25,000 November $37 calls were purchased for $1.29-$1.30 as part of a bullish spread, with shares at $32.31. The trade was below open interest as of the market’s open that day, however previous trading volumes accounted for by Investitute’s market scanners proved this to be a new position.

Those calls traded up to $4.20 today, better than 3 times their initial purchase price. The stock rose 22.1% at the same time, illustrating how quickly options can far outpace moves in 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.

EWZ was up 6.74% to close at $39.13 today. The exchange-traded fund, which tracks an index of Brazilian equities, has been heading higher thanks to a technical chart bottom as well as an improved outlook on the Brazilian economy as its presidential election takes place.

(Disclosure: I am long EWZ.)