Calls gain overnight in $TWLO

Upside option positions opened in Twilio (TWLO) yesterday morning are paying off today.

On Oct. 2, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 2,200 Weekly $300 calls expiring next Friday for $2.51 to $4.25 with shares at $279.48. Volume was above the strike’s existing open interest of 66 contracts, indicating that this was fresh buying.

Those calls have already traded for as much as $8.76 today, at least double their purchase prices. The stock surged 5.72% 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 last up by 12.1% at $287.78 in late-day trade. The cloud-platform company guided to a revenue beat for Q3 after the market closed yesterday, and its price target was raised at several covering firms this morning, such as RBC Capital which raised its target for the stock to $375 from $320.