$JPM calls turn exponential gains in two days

Option traders rode bullish momentum in JP Morgan (JPM) to gains today.

On Apr. 7, Market Rebellion’s proprietary Unusual Activity programs flagged the purchase of 7,000 April $110 calls for $0.13 to $0.27 with shares at $93.66. This was clearly fresh buying, as volume was clearly above the strike’s previous open interest of 5,795 contracts.

Those calls have traded for as much as $2.18 so far today, 10 times their average purchase price. The stock rose 11.39% in the same time frame, illustrating how quickly options can far outperform their underlying calls.

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.

JPM reached $104.39 this afternoon but has since pulled back to $101.90, still up 8.14% on the session. The bank has risen sharply, along with other financials, ahead of its quarterly earnings report due Apr. 14 before the open.