WFC – Wells Fargo & Co. – One bullish options investor established a large-volume, plain-vanilla debit call spread on Wells Fargo in the first half of the trading day with shares of the underlying stock rebounding 3.75% to $29.09 as of 12:00 pm (ET). The parameters of the spread suggest the trader is positioning for a continued recovery in WFC shares through July expiration. The investor purchased 11,000 calls at the July $30 strike for a premium of $1.23 apiece, and sold the same number of calls at the higher July $33 strike for a premium of $0.30 each. The net cost of the transaction amounts to $0.93 per contract, thus preparing the trader to make money above the effective breakeven price of $30.93 through expiration. Maximum potential profits of $2.07 per contract accumulate for the bullish player if Wells Fargo shares surge 13.45% over the current value of $29.09 to exceed $33.00 by expiration day in July. Shares of the financial services firm last traded above $33.00 back on May 13, 2010, when the stock traded at an intraday high of $33.83.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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