Option traders are making exponential gains on bullish positions on Twitter (TWTR) today on deal news.
On Sep. 27, Market Rebellion’s Unusual Activity Service found that 2,500 Weekly $46 calls, expiring this Friday, were bought as part of a complex bullish spread for $0.65 above the existing open interest of 1,161 with shares at $41.60.
Those calls have traded for up to $7.00 today, over 10.5 times their purchase prices. The stock rose 24.35% in the same time frame, illustrating the kind of leverage that can be achieved with 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.
TWTR in late session trading is up 21.39% at $51.64.