$BB bulls triple money overnight

BlackBerry surged on a strong earnings report today, yielding large returns on upside option positions opened in the previous session.

Just yesterday, Investitute’s market scanners identified the purchase of 1,800 October $10.50 calls for $0.39 to $0.49 with shares at $10.29. This was clearly fresh buying, as volume was well above the strike’s open interest of 344 contracts.

Those calls traded up to $1.54 today, more than 3 times their purchase prices. The stock rose 16.32% at the same time, showing how options can quickly outperform their underlying shares by a wide margin.

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.

BB spiked to $12 this morning before closing at $11.38, still up 11.68% on the session. The communications-software company surpassed quarterly estimates on the top and bottom lines before the market opened today.