Bullish bids pay off in $EBAY

Option traders quadrupled their money in eBay today.

On Jan. 31, Investitute’s tracking systems detected the purchase of 11,500 February $34 calls for $0.32 to $0.38 with shares at $33.09. Volume was well above the strike’s previous open interest of 8,540 contracts, indicating that this was new positioning.

Those calls sold for as much as $1.40 this afternoon, 4 times their average purchase price. The stock rose 6.29% in the same time frame, underscoring how quickly options can far outperform their underlying shares. Investitute co-founder Pete Najarian updated the trade this afternoon on CNBC’s “Halftime Report.”

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.

EBAY was up 2.16% to $35.05 today. The stock is up sharply since Jan. 22, when activist investment firm Elliott Management disclosed that it has taken a $1.4 billion stake in the online-auction giant.