$PFSI bulls get approved for profits

Option traders are banking big profits on upside positions in PennyMac Financial Services (PFSI) today.

On Sept. 3, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 2,200 November $60 calls for $1.83 to $2.15 with shares at $51.02. Volume was above the strike’s existing open interest of 170 contracts, indicating that this was fresh buying.

Those calls have traded for as much as $7.22 so far today, more than 3 times their purchase prices. The stock rose 29.07% in the same time frame, underscoring how quickly 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.

PFSI was last down 1.57% at $65.75. The mortgage specialist is estimated to report earnings on Oct. 29.