$EBAY calls up 7-fold overnight

Option traders who opened bullish positions in eBay only 24 hours ago are pocketing huge profits today.

Just yesterday, Investitute’s tracking systems found that 4,600 Weekly $39 calls expiring this Friday were purchased for $0.21 to $0.36 with shares at $38.79. These were clearly new positions, as open interest in the strike was only 326 contracts before the activity appeared. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $1.50 this afternoon, more than 7 times their initial purchase price. The stock rose 4.3% 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.

EBAY was up 2.48% today to close at $40.04. The online-auction giant has rallied since news reports yesterday that the company could acquire a 5% stake in Dutch payment processor Adyen, which eBay chose over PayPal in January.