Cheap $BAC calls rocket 10-fold

Bullish option traders posted exponential profits after strong quarterly results from Bank of America today.

On Jan. 8, Investitute’s tracking systems found that 3,000 Weekly $28 calls expiring on Feb. 1 were purchased for $0.09 and $0.10 with shares at $25.39. This was clearly fresh buying, as open interest in the strike was only 122 contracts before the activity appeared. Investitute co-founder Pete Najarian discussed BAC at that time on CNBC’s “Halftime Report,” saying bank stocks have “gotten so cheap” and were an “attractive value.”

Those calls traded up to $1.06 today, more than 10 times their purchase prices. The stock rose 13.04% in the same time frame, underscoring how quickly 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.

BAC was up 7.16% to $28.45 today. The bank reported record earnings before the market opened this morning.