Huge bet pays off in $ALLY

Bullish option traders have more than doubled their money in Ally Financial (ALLY).

On March 20, Investitute’s tracking systems detected the purchase of 24,600 January $35 calls in one print for $0.40 with shares at $26.52. This was clearly a new position, as open interest in the strike was only 275 contracts before that session began.

Those calls traded for as much as $1.05 this afternoon, more than 2.5 times their purchase price. The stock rose 19.5% at the same time, showing how options can far outperform their underlying shares.

Investitute co-founder Pete Najarian cited even more buying in the August $33 calls on CNBC’s “Halftime Report” today.

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.

ALLY was up 0.89% to $31.68 today. Last week Citi raised its price target on the financial services company to $37 from $35 while reiterating a “buy” rating on the stock.