Coinbase (COIN) is rising sharply today, rewarding upside call positions.
On Jan. 31, Market Rebellion’s Unusual Option Activity Service found that 7,100 Weekly $54 calls, expiring this Friday, were bought for $3.90 to $4.40 with shares at $56.34. This was clearly fresh buying, as open interest in the contract was just 998 before the activity appeared.
Those calls traded for as much as $11.80 today, at least 2.5 times their purchase prices. The stock rose 16.68% 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.
COIN finished the session up by 12.35% at $65.70 today.