$XSP call buyers quadruple their money

Bullish option trades in the CBOE S&P 500 Mini SPX Options Index have returned outsized gains today as the index has recaptured levels not seen since early October.

On Mar. 7, Investitute’s market scanners found that 8,658 Weekly 286 calls expiring on April 26 were bought for $0.97 as part of a bullish roll with the underlying at 275.21. As there was no open interest in the strike leading up to this trade, it was clearly a new position.

Those 26April 286 calls closed marked at $4.18 today, or 4 times purchase price. The underlying rose 3.74% at the same time, underscoring how quickly options can far outperform their underlying shares.

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.

The XSP rallied to close up 1.09% at 285.49 to end the session. The index, which tracks the S&P 500 at a 1/10 ratio and provides option liquidity to contracts with lower pricing, has rallied off the Dec. 24 lows amidst trade concerns and an ongoing questionable outlook for the world’s economies.