$EWZ call prices tear higher

Bullish option positions opened in the iShares MSCI Brazil Fund (EWZ) last Wednesday were already paying traders handsomely today.

On May 20, Market Rebellion’s Unusual Activity systems detected the purchase of 24,500 Weekly $25.50 calls expiring this Friday, May 29, as part of a bullish spread for $0.12 with shares at $23.68. Volume was well above the strike’s previous open interest of just 6,078 contracts, indicating that this was a new position.

Those calls traded for $1.72 this afternoon, more than 14 times their purchase price. The stock rose 14.4% in the same time frame, illustrating the kind of leverage that can be achieved with options.

It is the second winning trade in the ETF posted on Market Rebellion in as many sessions.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

EWZ moved up to close higher by 7.83% at $26.59 today. The exchange-traded-fund, which tracks a basket of Brazilian equities, gapped sharply higher this morning to trade above its recent trading range’s highs.