$SPY calls make quick profits

Bullish option traders collected fast profits as the SPDR S&P 500 Fund (SPY) popped higher today.

On Nov. 3, Market Rebellion’s Unusual Activity Service flagged the purchase of 5,000 Daily $350 calls expiring on Monday, Nov. 16, for $2.41 to $2.52 as part of a bullish spread with shares at $337.30. This was clearly fresh buying, as open interest in the strike was only 1,325 contracts before that session began.

Those calls have traded for as much as $6.91 today, over 2.5 times their purchase prices. The stock rose 4.41% 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) was last up 2.30% today at $351.43.