$GOGO call prices take flight

Bulls who opened upside option positions in Gogo Inflight Internet (GOGO) last week are seeing their bets take flight today.

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two consecutive sessions, and strikes, last week:

–On Aug. 25, 2,400 September $5 calls were purchased for $0.15 to $0.40 above open interest of 833 contracts with shares at $4.23.
–On Aug. 26, 4,000 September $6 calls were purchased for $0.30 to $0.80 above open interest of 169 contracts with shares at $5.25.

Those calls traded for as much as $3.00 and $2.13 today, respectively, at least 7.5 and 2.5 times their purchase prices. The stock rose as much as 89.13% in that same time period, a significant move but nowhere near that of its options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

GOGO was up 43.39% to $7.37 at the close. The in-flight broadband provider spiked today after entering into an agreement to sell its Commercial Aviation business to Intelsat S.A. (INTEQ) for $400 million