$C call buyers bank large profits

Option traders cashed in significant gains on expiring positions in Citigroup today.

On Nov. 22, Investitute’s proprietary systems identified the purchase of 4,200 December $74 calls for $0.64 to $0.83 with shares at $72.71. These were clearly new positions, as volume was well above the strike’s open interest of 1,411 contracts.

Those calls sold for $1.10 before expiring this afternoon, more than 70 percent higher than their original purchase price. The stock rose 3.3 percent in the same time frame, reflecting the type of leverage that options can provide.

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.

C was up 1.15 percent today to close at $74.77. The bank has climbed along with other financial leaders as tax legislation has progressed through Congress.