$SPLK call buyers post big profits

Splunk returned major gains today on bullish option positions opened just four sessions earlier.

On Tuesday, Investitute’s proprietary programs cited the purchase of 2,900 November $70 calls for $2.05 to $2.30 with shares at $68.08. Volume was above the strike’s open interest of 2,063, indicting that this was fresh buying.

Those calls ended today’s session trading for $11.90, nearly 6 times their original purchase price. The stock rallied 20 percent in the same time frame, underscoring how quickly options can far outperform their underlying shares.

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.

SPLK surged 17.89 percent to $81.70 today. The data-analysis software company received several upgrades from analysts after blowing past quarerly estimates and raising guidance after the market closed yesterday.