$SPY call prices surge fivefold

It took barely a week for bullish option traders to rack up huge gains in the SPDR S&P 500 Fund.

On July 5, Investitute’s market scanners found that 18,000 Weekly $279 calls expiring on July 27 were bought for $0.52 with shares at $272.03. Volume was well above the strike’s open interest of 11,365 contracts, showing that it was a new position.

Those calls traded for as much as $2.64 today, more than 5 times their purchase price. The stock rose 2.89% at the same time, 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.

SPY was up 0.06% to $279.54 today. The exchange-traded fund, which tracks the benchmark S&P 500 index, has closed higher for 5 of the last 6 days as it has rallied back to the high end of a range that has been in place since February.