Bullish option positions opened in the iShares MSCI Brazil Fund (EWZ) last week were paying traders handsomely this session.
On May 31, Market Rebellion’s Unusual Option Activity Service found that 30,000 Weekly $30.50 calls, expiring Jun. 30, were bought for $0.20 with shares at $28.68. This was clearly fresh buying, as open interest in the contract was just 20 before the activity appeared.
Those calls traded for as much as $1.05 today, a 425% return, while the stock rose 9.34% in the same time period, 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.
EWZ was up 1.95% to $31.35 at the close of trade.
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