$FB calls spike higher in hours

Option traders who opened bullish positions in Facebook this morning nearly tripled their money by early afternoon.

Less than 10 minutes after the opening bell, Investitute’s tracking systems found that 4,400 Weekly $175 calls expiring on Oct. 5 were purchased for $0.37 to $0.63 with shares at $168.98. This was clearly fresh buying, as volume was well above the strike’s open interest of 2,998 contracts. Investitute co-founder Pete Najarian cited the unusual activity on CNBC’s “Halftime Report” today.

Those calls rose to $1.40 in midday trading, almost 3 times their average purchase price, with volume topping 24,800 at the end of the session. The stock rose 1.65% at the same time, showing how quickly 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.

FB rose to $171.77 in midday trading before settling back to close at $168.84, up 1.13% on the session. The social-media stock today appeared to break out of a range that had been in place all month.