$WFC option bulls withdraw big profits

Patient option traders are withdrawing big profits today in upside calls in Wells Fargo (WFC).

Back on Oct. 26, 2020, Market Rebellion’s Unusual Activity Service detected the purchase of 15,000 January $32.50 calls, expiring next Friday, for $1.24 with shares at $22.63. Open interest in the strike before the trade occurred was just 11,274 contracts, showing that this was a new position.

Those calls traded up to $26.20 today, more than 21 times their purchase price. The stock rose 159.43% 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 3.68% to $58.06 at the close today.