The iShares Russell 2000 Index Fund (IWM) is trading higher today, delivering fast profits to upside option positions opened yesterday morning.
On Jul. 10, Market Rebellion’s Unusual Option Activity Service found that 14,000 Daily $187 calls, expiring Jul. 12, were bought for $0.72 to $1.09 above the existing open interest of 2,662 contracts with shares at $185.28.
Those calls have sold for as much as $2.81 today, a 157.8% return, while the stock rose 2.25% in the same time period, a large move but nowhere near that of its options 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.
The IWM was last higher by 0.8% at $189.38.
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