Bulls score big profits in $TWLO

Option traders have quadrupled their money on upside option positions in Twilio.

On Oct. 25, Investitute’s market scanners flagged the purchase of 4,600 February $75 calls for $6.81 with shares at $67.10. Open interest in the strike was only 175 contracts before the trade occurred, showing that it was a new position.

Those calls traded for $27.15 today, 4 times their purchase price. The stock surged 47.23% in the same time period, a huge move but still well below that of its options on a relative basis. Investitute co-founder Jon Najarian updated the trade on CNBC’s “Halftime Report” today.

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.

TWLO was up 4.26% today to close at $96.67. The cloud-communications company surpassed quarterly expectations and raised its outlook on Nov. 6, less than two weeks after the February calls were bought.