Calls post big gains in $ZEN

Option traders have doubled their money on bullish positions in Zendesk (ZEN) that expire tomorrow.

Just before quarterly results came out on Oct. 29, Market Rebellion’s tracking systems detected the purchase of 4,000 November $70 calls for $2.20 to $2.50 with shares at $66.74. This was clearly fresh buying, as open interest in the strike was 1,131 contracts before the trades occurred.

Those calls sold for as much as $4.30 today, more than twice their initial purchase price. The stock rose 11.48% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

ZEN is up 0.49% to $74.23 this morning. The software company, which topped earnings and revenue estimates after the market closed on Oct. 29, is presenting at conferences held by Stephens today and RBC on Nov. 20.