$WFC bulls quintuple their money

Patience has paid off big time for traders who opened upside positions in Wells Fargo three months ago.

On Sept. 11, Investitute’s tracking systems detected the purchase of 5,000 December $50 calls for $1.92 to $2.04 as part of a bullish spread with shares at $50.35. This was clearly a new position, as open interest in the strike was only 530 contracts before the trade occurred.

Those calls traded for $9.90 today, more than 5 times their original purchase price. The stock rose 19 percent in the same time period, an impressive gain but nowhere near that of its options.

In addition, Investitute co-founder Pete Najarian cited heavy buying in the February $60 calls Tuesday on CNBC’s “Halftime Report.” The price of those contracts have nearly doubled already.

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.

WFC was up 1.35 percent today to close at $59.36. The bank has rallied sharply with other financial names as tax-reform legislation has moved through Congress.