Upside option volume in Bank of America has exploded higher in the last few days, and traders are already reaping signficant profits.
About an hour into today’s session, Investitute’s tracking systems showed that 8,500 Weekly $24 calls that expire on Sept. 29 were purchased for $0.20 to $0.25 with shares at $23.60. Open interest interest in the strike was 6,783 contracts, indicating that this was fresh buying.
That volume ballooned to 70,700 by the end of the day, with premiums doubling in price to $0.45. The stock was up less than 1.4 percent in the same time, illustrating how quickly options can far outpace gains in their underlying shares.
This comes after the purchase of 50,000 Weekly $23.50 calls in the same expiration for $0.31 last Friday, which have since traded up to $0.76. Investitute co-founder Pete Najarian cited that activity on CNBC’s “Fast Money” show later that day and followed up with the new call buying on the program this evening.
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.
BAC rose 2.53 percent to $23.95. The banking giant continued to rebound from recent support this week as Treasury Secretary Steven Mnuchin vowed that the Trump administration would take action on tax reform.
(Disclosure: I am long BAC.)