$ETFC calls spike higher intraday

Option traders who opened bullish positions in E*Trade this morning nearly tripled their money by the end of the day.

Less than 10 minutes after the opening bell, Invesitute’s market scanners identified the purchase of 21,000 December $46 calls for $0.41 to $0.62 with shares at $45.11. These were clearly new positions, as open interest in the strike was only 1,589 contracts before the activity appeared.

Those calls finished the session trading for $1.15, almost 3 times their original purchase price. The stock rose less than 2.8 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.

ETFC was up 2.61 percent to close at $2.61 this afternoon. The online brokerage rallied along with other financial names as Jay Powell testified during his Senate confirmation hearing to be the Federal Reserve’s next chair.