Short-term $GS calls score fast

It took fewer than three sessions for option traders to post sizable gains in Goldman Sachs.

On Monday, Aug. 27, Investitute’s tracking systems showed that 4,000 Weekly $242.50 calls expiring this Friday were purchased for $0.23 to $1.43 as part of a bullish spread with shares at $241.99. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,242 contracts. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $1.56 today, about twice their average purchase price. The stock rose just 0.26% in the same time frame, illustrating the kind of leverage that can be achieved with 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.

GS climbed to $242.79 midday before pulling back to close at $241.40, off 0.07% on the session. The bank has been rebounding with other financial names in the last two weeks.