Large banks could not hold onto early gains today, but bullish option positions in Citigroup still turned significant profits.
On June 2, Investitute’s market scanners found that 3,300 Weekly $62 calls expiring on June 30 were purchased mostly for $0.87 with shares at $60.79. Volume was well above the strike’s open interest of 1,311 contracts, indicating that this was fresh buying.
This morning those calls sold for $2.25 before the stock pulled back, representing a gain of more than 150 percent. C was up just 5.4 percent in the same period, illustrating 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.
C was down 0.33 percent to close at $63.41 today. Major banks opened higher after passing the Federal Reserve’s “stress tests” yesterday evening but faded throughout the session.