$ITB calls build fast profits

It took just two sessions for option traders to double their money on upside positions in the iShares U.S. Home Construction Fund.

On March 25, Investitute’s tracking systems found that 5,000 Weekly $35 calls expiring on April 12 were bought for $0.60 and $0.65 above open interest of 151 contracts. Stock 34.59.

Those calls traded for as much as $1.51 today, more than double their purchase prices. The stock rose 4.65% in the same time frame, showing how quickly options can far outpace gains in 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.

ITB was up 2.11% to $35.86 today, rallying along with several other homebuilders. The exchange-traded fund climbed after shares of Lennar, the ETF’s second-largest holding with about a 13.5% weighting, and KB Home rose following their quarterly results.