$GS bulls quadruple their money

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

On Jan. 7, our Unusual Activity Service identified the purchase of 3,100 Weekly $240 calls expiring on Jan. 10 for $0.70 to $1.14 with shares at $236.49. This was clearly fresh buying, as open interest in the strike was only 1,714  contracts before that session began.

Those calls traded for as much as $3.77 today, or about 4 times their average purchase price. The stock rose 2.92% 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 up 1.85% to $242.17 in late-day trading. The investment bank was upgraded to a Buy rating by both Buckingham and BofA this morning.