$DDOG call buyers hunt for gains

Datadog (DDOG) has been a strong performer off its recent lows in the stay-at-home economy and bullish option traders are cashing in.

On May 7, Market Rebellion’s Unusual Activity Service found that 4,000 May $60 calls were bought $0.10 to $0.30 with shares at $48.03. This was clearly a new position, as open interest in the strike before that session began was only 20 contracts.

Those calls traded for $10.40 today, at least 34 times their purchase prices. The stock rose 45.97% in the same time frame, 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.

DDOG was up 23.65% to $68.86 today, a new all-time-high close. The cloud monitoring service beat earnings expectations on its top and bottom lines after the market closed yesterday, while also guiding the quarter and fiscal year higher.