$EWW bulls book profits

Bullish option traders posted quick gains in the iShares Mexico ETF on the back of global trade progress.

On Nov. 28, Investitute’s market scanners identified the purchase of 25,000 Weekly $40.50 calls, expiring on December 14, from $0.64 to $0.66 with shares at $38.51. Volume was well above the strike’s open interest of 650 contracts, showing that this was a new position.

Those calls sold for as much as $1.70 today, nearly three times times their purchase price. The stock rose 7.48% in the same time frame, a huge move but still nowhere near that of its options on a relative basis.

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.

EWW gapped higher this morning to an intraday high of $41.96 before pulling back to settle at $40.57, up 0.6% on the day. The ETF, which tracks a basket of Mexican equities, lifted as trade progress in North America pushed forward alongside the G20 summit over the weekend.