Bulls spin profits in $PTON

Option traders have logged big profits on upside positions opened in Peloton (PTON) ahead of its earnings report.

On May 4, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 2,100 May $45 calls for $0.47 to $0.67 with shares at $33.16. Volume was above the strike’s existing open interest of 393 contracts, indicating that this was fresh buying.

Those calls have traded for as much as $1.66 this afternoon, more than 3 times their initial purchase price. The stock rose 18.09% in the same time frame, underscoring how quickly options can far outperform 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.

PTON was last at $38.53, up 6.38% on the session. The fitness equipment and service company will report earnings after the closing bell today.