$WFC call buyers deposit winnings

Wells Fargo continues to rally in the face of detractors, turning significant profits for bullish option traders.

On Dec. 5, Investitute’s tracking systems detected the purchase of 10,100 February $60 calls for $1.36 to $1.54 with shares at $58.29. Volume was well above the strike’s open interest of 7,041 contracts, indicating that this was fresh buying. Investitute co-founder Pete Najarian, who has pounded the table for WFC for the last several months, cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $3.71 this morning, nearly 3 times their original purchase price. The stock rose 8 percent in the same time frame, underscoring how options can far outperform their underlying shares. It is the third winning trade in Wells Fargo posted on Investitute in the last month.

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 1.25 percent today to close at $62.33. The bank has risen along with other financial leaders on tax reform and rising interest rates.