$EWZ call buyers score big again

Bullish option positions opened at the end of last week in the iShares MSCI Brazil Fund were already yielding significant gains by the end of today’s session.

On Friday, Investitute’s tracking systems showed that 6,000 Weekly $40 calls expiring on May 25 were purchased for $0.10-$0.11 with shares at $37.97. This was clearly a new position, as open interest in the strike was only 3,217 contracts before that session began.

Those calls traded up to $0.40 today, 4 times their initial purchase price. The stock rose 4.5% at the same time, illustrating how quickly options can far outpace moves in 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.

EWZ was up 2.58% to close at $39.38 today. The exchange-traded fund, which tracks an index of Brazilian equities, outperformed with a weaker dollar today.

(Disclosure: I am long EWZ.)