$EEM bulls ring the register

Option traders are collecting exponential profits in the iShares MSCI Emerging Markets Fund (EEM) today.

On Oct. 31, Market Rebellion’s tracking systems detected the purchase of 75,000 November $43.50 calls for $0.14 to $0.16 with shares at $42.45. This was clearly a new position as open interest in the strike before the activity occurred was just 17,350 contracts.

Those calls traded for as much as $0.67 today, better than 4 times their purchase prices. The stock rose 3.18% in the same time frame, underscoring how 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.

EEM rose 0.99% today to close at $43.65. The exchange-traded fund’s top holdings include several major Chinese companies, including Alibaba (BABA), which recently topped earnings estimates, sending call prices higher.