Calls ring up profits with $PYPL

Option traders doubled their money on bullish positions in PayPal today.

On Nov. 23, Investitute’s tracking systems detected the purchase of 2,500 February $87.50 calls for $2.48 as part of a bullish spread with shares at $78.80. This was clearly a new position, as open interest in the strike was only 177 contracts before that session began. Investitute co-founder Pete Najarian cited heavy volume in the December $90 calls only a few sessions earlier on CNBC’s “Halftime Report.”

Those calls traded for $4.76 just before today’s closing bell, about twice their purchase price. The stock rose 8.63% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

PYPL was up 1.94% to $85.82 today. The digital-payment service, which rallied after strong quarterly results in mid-October, has held up relatively well throughout the market’s recent volatility.