$ENPH calls shine bright

Option traders who opened bullish positions in Enphase Energy (ENPH) are seeing significant gains this morning on the back of the company’s quarterly earnings report.

On July 18, Investitute’s market scanners detected the buying of 7,000 August $22.50 calls for $1.10 to $1.35 with shares at $20.15. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls have traded up to $5.52 this morning, 5 times their initial purchase price. The stock has risen 38.11% at the same time, underscoring 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.

ENPH is currently up 28.50% on the day at $27.80. The solar energy technology company reported earnings after the closing bell yesterday, beating on revenues and raising its fiscal year guidance.