$XLF call buyers deposit large gains

Bullish traders are tripling their money today in upside option trades on the SPDR S&P Financial Fund (XLF).

On Dec. 20, Market Rebellion’s Unusual Activity Service detected the purchase of 4,000 Weekly $38 calls, expiring this Friday, for $0.65 to $0.70 with shares at $37.42. Open interest in the strike was just 253 contracts before that session began, showing that this was fresh buying.

Those calls have traded up to $2.62 today, more than 3.5 times their purchase prices. The stock rose 8.52% in the same time period, illustrating the kind of leverage that can be achieved through options.

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.

XLF was last up 2.87% at $40.66.