$XBI option bulls double money

Bullish option traders have turned large profits in the SPDR S&P Biotech Fund ($XBI) in just a matter of days.

On Oct. 28, Market Rebellion’s Unusual Activity Service found that 2,000 Weekly $127.50 calls, expiring this Friday, were bought for $1.20 to $1.30 above the existing open interest of 6 with shares at $125.28.

Those calls traded for as much as $2.58 during this session, about 2 times their purchase prices. The stock rose 2.91% in the same time frame, showing how options can far outperform their underlying shares on a relative basis.

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.

XBI was last up 3.47% to $129.14 in late session trade.