Bullish option traders are scoring a big win in upside positions on the iShares China Large-Cap Fund (FXI) today.
On Nov. 2, Market Rebellion’s Unusual Option Activity Service found that 15,400 Weekly $23 calls, expiring on Nov. 11, were bought for $0.31 as part of a bullish spread with shares at $21.97. This was clearly fresh buying, as open interest in the contract was just 283 before the activity appeared.
Those calls have sold for as much as $1.27 so far today, more than 4 times their purchase price. The stock rose 8.1% in the same time frame, showing how options can far outperform moves in their underlying shares on a relative basis.
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.
FXI was last higher by 7.11% at $23.74.
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