Bulls take to the clouds with $TWLO

Upside option positions opened in Twilio (TWLO) on Monday are paying off today.

On May 4, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 3,000 May $125 calls, as part of a bullish spread while selling an equivalent amount of downside puts, for $1.97 to $2.37 with shares at $112.55. Volume was above the strike’s existing open interest of 230 contracts, indicating that this was fresh buying.

Those calls traded for as much as $51.00 today, at least 21.5 times their purchase prices. The stock surged 56.37% in the same time period, a large move but still far below that of its options on a relative basis.

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 39.60% to close at $170.89 today. The cloud-platform company topped quarterly expectations on both its top and bottom lines after the market closed yesterday.