$SPY calls triple buyers’ money overnight

Prescient option trades targeting short term upside in the SPDR S&P 500 Fund rewarded their buyers as the index rallied above its 50-day SMA.

A mere hour before a report that Treasury Secretary Steven Mnuchin proposed to roll back tariffs on China yesterday, Investitute’s market scanners found that 20,000 Wednesday-Expiring Weekly $264 calls expiring on January 30 were bought for $1.47 and $1.66 with shares at $261.38 and $261.88. Volume blew away the strike’s open interest of 391 contracts, showing that this was a new position.

Those calls traded for as much as $4.51 today, about triple their average purchase price. The stock rose 2.08% 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 climbed to an intraday high of $266.98 before pulling back to close up 1.33% at $266.46 to end the session. The exchange-traded fund, which tracks the benchmark S&P 500 index, has rallied sharply off its 52-week lows.