$VZ call buyers dial up big profits

Option traders quadrupled their money in bullish positions opened on Verizon Communications less than three days earlier.

On Tuesday, Investitute’s market scanners identified the purchase of 3,000 October $48 calls for $0.77 as part of a bullish spread with shares at $48.19. This was clearly a new position, as volume was well above the strike’s open interest of 1,060 contracts.

Those calls traded as high as $3.03 this morning, 4 times their purchase price. The stock rose 5.5 percent in the same time frame, illustrating the kind of leverage that can be achieved through options.

Long calls lock in the price where a 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.

VZ was up 1.15 percent to $49.21 today. The wireless carrier beat revenue and subscriber estimates this morning.