Calls double overnight in $BAC

Option traders posted substantial profits today on bullish positions opened in Bank of America only 24 hours earlier.

Just yesterday, Invesitute’s market scanners found that 13,500 August $30.50 calls were purchased for $0.15 to $0.20 with shares at $30.26. Volume was well above open interest, indicating that this was fresh buying. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded as high as $0.38 today, twice their purchase prices. The stock rose
1.92% gain at the same time, illustrating the kind of leverage that can be achieved quickly 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 gained 1.19% to $30.72 today as the financial sector rebounded with the broader market rally.

(Disclosure: I am long BAC.)