Traders bank profits in $WFC

Bullish option traders more than doubled their money in Wells Fargo today.

On May 30, Investitute’s proprietary programs showed that 3,000 Weekly $54 calls expiring on June 29 were purchased for $1.17 to $1.20 with shares at $53.69. This was clearly fresh buying, as open interest in the strike was a mere 181 contracts before the activity appeared.

Those calls sold for $3 this morning, at least 2.5 times their purchase prices. The stock rose 6.15% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

WFC was up 3.37% to $55.44 today. The bank passed the Federal Reserve’s “stress test” and announced a $24.5 billion stock-buyback plan after the market closed yesterday.