$HSBC bulls deposit profits

Option traders are collecting big gains on upside positions in HSBC (HSBC) today.

On Oct. 21, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 8,700 Weekly $20.50 calls, expiring on Oct. 30, for $0.27 to $0.36 with shares at $19.96. Volume was above the strike’s existing open interest of 301 contracts, indicating that this was fresh buying.

Those calls have traded for as much as $1.28 today, at least 3.5 times their purchase prices. The stock rose 8.87% in the same time frame, underscoring 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.

HSBC was last higher by 3.57% at $21.47. The investment bank missed estimates during its earnings report today but outlined an overhaul of its business model including cost cuts.