$EEM bulls quadruple their money

Option traders racked up huge profits today in the iShares MSCI Emerging Markets Fund.

On Dec. 8, Investitute’s tracking systems detected the purchase of 29,400 March $46 calls for $1.22 to $1.31 with shares at $45.91. Volume was far above the strike’s open interest of 10,029 contracts, indicating that this was fresh buying.

Those calls traded for $5.25 this afternoon, more than 4 times their purchase prices. The stock rose 10.9% in the same time period, underscoring how options can far outperform their underlying shares. Investitute co-founder Pete Najarian cited the purchase of even more EEM calls at the April $51 strike today on CNBC’s “Halftime Report.”

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.

EEM was up 0.45% today to close at $50.96. The exchange-traded fund has rallied in the last month as the global recovery has taken hold.