Option traders are collecting exponential profits in the iShares MSCI Emerging Markets Fund (EEM) today.
On Mar. 20, Market Rebellion’s Unusual Activity Service found that 10,500 Weekly $38 calls, expiring tomorrow, were bought for $0.33 with shares at $37.53. This was clearly fresh buying, as open interest in the strike was just 361 contracts before the activity appeared.
Those calls traded for as much as $1.22 today, over 3.5 times their purchase price. The stock rose 4.45% in the same time frame, underscoring how 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.
EEM was up by 1.39% today, closing at $38.77.
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