$WFC bulls score overnight gains

Bullish option traders are banking big profits today in Wells Fargo (WFC).

Yesterday, on Jul. 8, Market Rebellion’s Unusual Activity Service detected the purchase of 4,500 Weekly $42.50 calls, expiring today, for $0.34 to $0.35 with shares at $42.33. Open interest in the strike before the trade occurred was just 306 contracts, showing that this was a new position.

Those calls traded up to $1.50 today, at least 4 times their purchase prices. The stock rose 3.97% in the same time period, 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 3.73% to $43.91 at the close today. The bank is scheduled to report earnings on Jul. 14 before the open.