$ARKK option bulls triple money

Bullish option traders are riding big gains today in the ARK Innovation ETF (ARKK).

On Jan. 10Market Rebellion’s Unusual Option Activity Service found that 4,250 Weekly, Jan. 13 expiring, $35.50 calls were bought as part of a bullish spread for $0.18 with shares at $33.03. This was clearly fresh buying, as open interest in the contract was just 1,981 before the activity appeared.

Those calls have traded for as much as $0.57 this session, more than 3 times their purchase price. The stock rose 8.9% at the same time, underscoring how quickly options can far outperform 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.

ARKK closed higher on the day by 1.41% at $35.99.

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