$F drives profits for short-term calls

Option traders have been opening upside positions in Ford all week, and today they paid off.

On Tuesday, Investitute’s market scanners showed that 7,000 Weekly $11 calls that expire on Sept. 8 were purchased mostly in one print for $0.09 with shares at $10.84. Volume was well above the strike’s open interest of 4,683 contracts, indicating that this was fresh buying.

This morning those calls sold for $0.25, more than doubling in less than four sessions. The stock was up just 3.28 percent in the same time, illustrating the kind of leverage that can be obtained through options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

F was up 0.82 percent to close at $11.03 today. The auto maker rallied along with other car companies at least partly on the belief that vehicles would need to be replaced in flood-ravaged Gulf of Mexico. Ford also reports monthly sales figures tomorrow.