$GS bulls double their money

Option traders cashed in large profits on Goldman Sachs (GS) today.

On March 27, Investitute’s market scanners identified the purchase of 2,150 July $195 calls for $8.60 to $8.70 with shares at $189.90. This was clearly fresh buying, as open interest in the strike was only 347 contracts before that session began.

Those calls traded for as much as $18.90 today, more than twice their purchase prices. The stock rose 12.59% in the same time period, underscoring how 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.

GS is off 0.08% to $215.34 in midday trading. The investment bank surpassed estimates on the top and bottom lines yesterday morning.