Yelp screams profits for call buyers

Bullish option positions more than tripled in value after Yelp’s quarterly results this morning.

As Investitute co-founder Jon Najarian pointed out on July 14, 2,099 August $32 were bought in one print for $2.53 with shares at $31.53. Volume was double the open interest in the strike, showing that it was a new position.

Today those calls traded for $8.40, a profit of more than 230 percent. The stock rose 28 percent in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where the 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.

YELP soared 27.67 percent to close at $40.05 today. The social-reviews site posted a surprise profit and announced the sale of its Eat24 online food-ordering service to GrubHub for $287.5 million in cash.