$SPY calls make big profits

Bullish option traders collected big profits as the SPDR S&P 500 Fund (SPY) popped to new highs today.

On Oct. 20, Market Rebellion’s Unusual Activity Service flagged the purchase of 14,160 January $365 calls for $6.42 as part of a bullish spread with shares at $344.10.

Those calls traded for as much as $11.92 today, nearly twice their purchase price. The stock rose 8.69% 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 (SPY) opened at a new high this morning but closed down by 0.19% at $371.46.