$V bulls tap for profits

Visa (V) bulls scored big today on short-dated upside calls.

On Aug. 17, Market Rebellion’s Unusual Activity Service detected the purchase of 13,500 August $200 calls for $1.05 to $2.40 with shares at $196.85. This was clearly fresh buying, as open interest in the strike was only 6,129 contracts before the activity appeared.

Market Rebellion co-founder Jon Najarian noted the activity during his 3@3 show that day.

Those calls traded for as much as $5.10 during today’s session, more than double their purchase price. The stock rose 4.08% in the same time period, illustrating how quickly options can far outperform moves in 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.

V was marginally down at the close by 0.02% at $204.13 after trading as high as $205.14 earlier. The electronic fund transfer company was maintained with an Overweight rating at JPMorgan on Monday, which also raised its price target for the shares to $229 from $186.