Zillow calls spike before earnings

Zillow’s quarterly results come out later this week, but traders can already cash in on recent bullish positions.

On April 26, Investitute’s tracking systems found that 2,000 Weekly $40 calls expiring this Friday were bought for $0.55 to $0.65 with the stock at $37.92. There was no open interest in the strike before that session began, showing that these are new positions.

Those contracts ended today at $1.30, more than doubling in value barely a week after they were purchased. The stock rose less than 5.8 percent in that time, underscoring how options can provide leverage that far exceeds gains in their underlying equities.

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.

Z rose 2.36 percent today to finish at $39.92. The real-estate information site, which is scheduled to report earnings this Thursday after the close, has surged more than 18 percent in the last month as the housing market continues to strengthen.