Option traders bank profits in $WFC

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

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two sessions in February:

–On Feb. 2, 27,903 April $32.50 calls were purchased for $1.37 above open interest of 14,507 contracts with shares at $30.60.
–On Feb. 24, 25.000 April $40 calls were bought for $1.58 above open interest of 22,233 contracts with shares at $38.15.

Those calls have traded for as much as $11.40 and $4.05 today, at least 8 and 2.5 times their respective purchase prices. The stock rose by as much as 43.86% in the same time frame, showing how options can far outperform their underlying shares.

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 last up 4.11% to $43.98 in afternoon trade. The bank topped earnings estimates this week during its quarterly report Wednesday morning.