Call prices spike 8-fold in $BAC

Bank of America has rebounded sharply on quarterly numbers, yielding substantial profits on bullish option positions.

On July 6, Investitute’s market scanners identified the purchase of 70,000 July $29.50 calls for $0.09 as part of a bullish roll with shares at $28.02. This was clearly a new position, as volume was far above the strike’s open interest of 14,991 contracts.

Those calls sold for $0.73 today, more than 8 times their purchase price. The stock rose 7.74% 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.

BAC was up 0.77% to $30.01 today. The banking giant beat quarterly estimates yesterday morning with particular strength in consumer loans.