$SPY bulls score big in just days

The SPDR S&P 500 Fund (SPY) gapped higher this morning, tripling the value of bullish option positions opened Friday.

On June 1, Investitute’s proprietary programs showed that 59,000 $276 calls expiring on June 15 were purchased from $0.66 to $0.76 with shares at $272.76. These were clearly new positions, as the volume was well above the strike’s open interest of 49,030 contracts in place before the activity appeared.

After rattling markets for weeks, fears of a potential trade war appeared to subside last Friday as SPY shares opened above two key technical levels. Those levels were the 8-day exponential-moving-average and the downward trending line of resistance formed since Jan. 26. The bullish combination may have been the signal that these investors were waiting for to get long.

Those June $276 calls were sold for as much as $2.52 today, more than 3 times their initial purchase price. The stock rose 1.75% in the same time frame, underscoring how options can far outperform moves in 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.

The SPDR S&P 500 Fund rallied 0.87% today to close just off its session high of $277.50. The investors in those June $276 calls took profits and then opened new positions to capture more upside at a higher strike, purchasing 62,350 $279 calls that expire on June 29 for $0.65 and $0.66.