Ameritrade calls turn 500% profit

Bullish option positions reaped enormous gains after TD Ameritrade reported strong quarterly results this morning.

On May 19, Investitute’s proprietary programs found that 2,500 August $38 calls were purchased for $1.40 to $1.50 with shares at $36.77. These were new positions, as open interest in the strike was just 433 contracts before the trades appeared.

Today those calls were listed at $8.65, representing an average gain of 500 percent. The stock rose 27 percent in the same period, underscoring the kind of leverage that can be achieved through options.

Long calls lock in the price where the 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.

AMTD was up 4.33 percent to $46.72 today. The online brokerage beat profit and revenue estimates before the market opened.