$GLD call prices shine

Bulls are piling up gains in upside option positions today in the SPDR Gold Trust (GLD).

On Feb. 6, Market Rebellion’s Unusual Option Activity Service identified the purchase of 10,000 April $185 calls as part of a bullish spread for $1.38 with shares at $173.46. The volume was well above the open interest of 6,702 contracts at the time, indicating that this was a new position.

Those calls have traded for as much as $5.10 today, a 269.57% return, while the stock rose 8.46% at the same time, showing how quickly options can far outperform their underlying shares.

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.

GLD was up 1.86% to close at $187.98.