$PYPL pays off for expiring calls

Option traders posted exponential gains on bullish positions in PayPal just before they expired today.

On Sept. 27, Investitute’s proprietary programs cited the purchase of 5,200 November $65 calls for $1.98 to $2.14 with shares at $63.48. These were clearly new positions, as open interest in the strike was only 741 contracts before the trades occurred.

Those calls traded up to $12.51 today, more than 6 times their original purchase price. The stock rallied 21.3 percent in the same time period, an impressive move but nowhere near that of its options. It was the second winning trade in PayPal posted on Investitute in the last month.

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 reached an all-time high of $78.01 this morning before ending the session off 1.7 percent at $76.38. KeyBanc and Baird both raised their price targets on the online-payment service to $85 from $80 this morning.