$PTON bulls ride for profits

Option traders logged big profits on upside positions in Peloton (PTON) after its earnings report today.

On Aug. 26, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 3,500 Weekly $75 calls, expiring today, for $2.40 to $3.15 with shares at $67.77. Volume was above the strike’s existing open interest of 2,516 contracts, indicating that this was fresh buying.

Those calls traded for as much as $22.52 this morning, more than 7 times their purchase prices. The stock rose 43.94% 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.

PTON ended the session lower by 4.23% at$84.04 along with broader market weakness, but only after gapping higher to $98.11 at the open. The fitness equipment and service company topped estimates for its earnings report yesterday afternoon.