$NOW bulls turn major profits

ServiceNow (NOW) is up sharply after reporting earnings, and upside call positions are profiting.

On Oct. 23, Market Rebellion’s Unusual Activity Service found that 3,500 February $220 calls were bought for $20.40 as part of a bullish roll with shares at $216.01. Volume was well above the strike’s open interest of 42 contracts, indicating that this was clearly fresh buying.

Those calls are currently marked for $115.30, more than 5 times their purchase price. The stock rose 56.22% in the same time frame, a large move but nothing like that of its options on a relative basis.

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.