$NRZ bulls triple money

Bullish option traders have tripled their money today in New Residential (NRZ).

On Sep. 9, Market Rebellion’s Unusual Activity tracking systems found that 5,000 November $8 calls were bought for $0.41 to $0.46 with shares at $7.40. This was clearly fresh buying, as open interest in the strike was only 2,326 contracts before the activity appeared.

Those calls have traded up to $1.31 today, 3 times their average purchase price. The stock rose 25.95% in the same time period, illustrating the kind of leverage that can be achieved quickly with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

NRZ was last up 8.53% to $9.36 today. The capital and services provider to the mortgage and financial services industries is next estimated to report earnings on Feb. 4.