Option traders rang up big gains in PayPal today after quarterly numbers easily topped expectations.
On Oct. 11, Investitute’s proprietary programs cited the purchase of 6,000 November $70 calls for $1.26 to $1.70 with shares at $67.77. This was clearly fresh buying, as open interest in the strike was only 1,051 contracts before that session began.
Those calls traded for $2.98 this morning, more than double their original purchase price. The stock rose just 5.4 percent in the same time frame, illustrating the kind of leverage that can be achieved through 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.
PYPL jumped 5.53 percent today to close at $70.97. The electronic-payment service was upgraded by several research firms this morning after beating earnings and revenue estimates while raising guidance last night.