$WFC bulls double money

Wells Fargo (WFC) rallied after naming a new CEO today, handing large profits to upside option traders.

On Sept. 5, Market Rebellion’s activity scanners identified the purchase of 6,400 December $52.50 calls for $0.58 to $0.61 with shares at $47.71. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 2,443 contracts.

Those calls traded for as much as $1.50, more than 2.5 times their average purchase price. The stock rose 7.55% in the same time period, illustrating the kind of leverage that can be achieved with options.

It is the second winning trade in the name posted on Market Rebellion since Sept. 11.

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 is up 3.57% to $50.61 heading into the closing bell today. The bank named veteran industry executive Charles Scharf as chief executive this morning.