$F bulls back up for gains

Option traders hauled a load of profits in Ford (F) today.

On Jul. 2, Market Rebellion’s Unusual Activity programs found that 19,000 July $6.50 calls, expiring this Friday, were purchased for $0.09 to $0.14 with shares at $6.04. This was clearly a new position, as open interest in the strike was only 9,419 contracts before the activity appeared.

Those calls traded for as much as $0.32 today, at least 2 times their purchase prices. The stock rose 11.75% at the same time, showing how quickly options can far outpace gains in their underlying shares.

Long calls lock in the price where the 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.

F was up 5.89% settling at $6.74 today. The auto maker, which unveiled its newest model Bronco on Monday night, will report earnings on Jul. 30 after the closing bell.