$COF calls surge three-fold

Bullish option traders turned exponential profits in Capital One Financial (COF) today.

On July 16, Investitute’s tracking systems detected the purchase of 3,000 August $92.50 calls for $1.38 to $1.44 as part of a bullish roll with shares at $90.17. This was clearly a new position, as open interest in the strike was only 434 contracts before the trade occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $4.86 this afternoon, about 3.5 times their initial purchase price. The stock rose less than 7.5% 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.

COF is up 2.78% to $96.96 in late-day trading. The banking and credit-card company topped earnings and revenue estimates on July 18.