Bulls withdraw big gains from $IBN

Bullish option traders scored large profits overnight in India-based ICICI Bank.

Just yesterday, Investitute’s market scanners identified the purchase of 5,900 January $9 calls for $0.19 to $0.22 with shares at $8.45. These were clearly new positions, as open interest in the strike was only 1,286 contracts before the trades occurred.

Those calls sold for $0.60 this morning, more than 3 times their original purchase price. The stock was up 9.5 percent at the same time, showing how quickly options can far outpace gains in 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.

IBN The Mumbai-based bank was upgraded to a “buy” recommendation by Goldman Sachs yesterday and UBS last week.