$ITUB call prices rocket

Brazilian stocks have been moving higher month-to-date, and traders are posting big gains on Itau Unibanco (ITUB).

On Mar. 4, Market Rebellion’s Unusual Activity Service found that 10,700 June $5 calls, expiring this Friday, were bought for $0.40 to $0.44 above open interest of just 4,828 contracts with shares at $4.76.

Those calls have traded up to $1.45 this session, over 3 times their original purchase prices. The stock rose 35.92% in the same time frame, a large move but nowhere near that of its options.

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.

ITUB was last down 0.39% to $6.34 today after trading to $6.50 earlier in the session. The Brazilian bank is next expected to report earnings on Aug. 2 after the close.