Calls post quick gains in $TWLO

It took less than three days for option traders to triple their money in Twilio.

On Wednesday, Investitute’s market scanners identified the purchase of 2,100 April $40 calls for $0.59 to $0.67 with shares at $35.24. This was clearly fresh buying, as open interest in the strike was only 707 contracts before the activity appeared.

Those calls traded up to $1.95 today, nearly 3.5 times their original purchase price. The stock rose 5.7% at the same time, showing how quickly options can far outpace gains in their underlying shares.

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 jumped 6.78% to $37.33 today. The cloud-communications company rallied after partner Salesforce.com surged on strong quarterly results Wednesday afternoon. Twilio is expected to report its own earnings on May 2 after the market closes.