$FXI calls deliver for bulls

Bullish option traders tripled their money in the iShares China Large-Cap Fund today after data on the world’s second-largest economy returned to a growth reading this week.

On March 25, Investitute’s market scanners showed that 10,000 $44 calls expiring on April 18 were purchased for $0.52, with shares at $43.34, as part of a bullish spread. These were clearly new positions, as open interest in the strike was only 3,047 contracts before the activity appeared.

Those calls sold for as much as $1.72 today, more than 3 times their initial purchase price. The stock rose 4.91% in the same time frame, illustrating the kind of leverage that can be achieved with options.

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.

FXI rose to close at $45.06 today, up 0.72% after reaching a new year-to-date high of $45.50 earlier in the session. Other Chinese names have rallied along with the exchange-traded fund recently.