$ELLI bulls triple their money

Option traders reaped exponential gains on upside positions in Ellie Mae today.

On Feb. 6, Investitute’s market scanners identified the purchase of 6,900 March $85 calls for $4 and $4.10 with shares at $82.78. This was clearly fresh buying, as open interest in the strike was a mere 51 contracts before the activity appeared.

Those calls traded for as much as $14.78 today, more than 3.5 times their purchase prices. The stock rose 20.19% in the same time frame, underscoring how options can far outperform 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.

ELLI spiked higher by 20.79% to $98.95 today. Shares soared this morning on news that private-equity firm Thoma Bravo is buying the mortgage-finance technology company for $3.7 billion.