$F option bulls load up profits

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

On Apr. 20, Market Rebellion’s Unusual Activity Service found that 5,000 Weekly $12 calls, expiring this Friday, May 28, were bought for $0.44 with shares at $11.46. This was clearly fresh buying, as open interest in the strike was just 922 contracts before the activity appeared.

Those calls traded for as much as $3.00 today, over 6.5 times their purchase price. The stock rose 30.98% 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 last up 5.88% at $14.66 today, setting a new 5-year high of $15.05 earlier in the session. The auto maker, which recently unveiled its electric F-150 model, saw its price target raised to $16 and $17 at Deutsche Bank and RBC Capital, respectively, this morning.