Call prices surge in $SNAP

Upside option positions opened in Snap (SNAP) just last week are already paying exponential gains today.

On May 27, Market Rebellion’s Unusual Activity Scanners found that 6,500 Weekly $17.50 calls expiring on Jun. 5 were bought for $0.27 to $0.34 with shares at $16.88. This was clearly fresh buying, as open interest in the strike was only 1,184 contracts before that session began.

Those calls traded for as much as $2.08 today, more than 6 times their purchase prices. The stock rose 15.7% in the same time frame, a large move but nowhere near 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.

SNAP ended the session up 3.66% to $19.55 this afternoon, just shy of its 52-Week high ($19.76). The social-media company’s price target was raised to $24 from $18 this morning at Deutsche Bank.