$FXI calls triple for bulls

Bullish option traders tripled their money in the iShares China Large-Cap Fund (FXI) today.

On Sept. 27, our tracking systems detected the purchase of 16,000 November $41.50 calls for $0.43 to $0.48 with shares at $39.58. These were clearly new positions as open interest in the strike was only 1,793 contracts before the activity appeared.

Those calls traded for as much as $1.39 today, more than 3 times their average purchase price. The stock rose 7.86% 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 1.21% to close at $42.51 today, its highest closing level since late July of this year. The exchange-traded fund has risen sharply over the past week alongside positive trade developments between the U.S. and China.