$PYPL call buyers post big gains

PayPal spiked higher today on strong quarterly results, yielding large returns on upside option positions.

Back on April 27, Investitute’s tracking systems detected the purchase of 5,000 October $75 calls for $5.65 and $5.70 with shares at $73.71. This was clearly a new position, as open interest in the strike was only 429 contracts before that session began.

Those calls traded up to $10.50 today, nearly double its purchase prices. The stock rose 15.98% in the same time period, showing how 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.

PYPL surged 9.42% to $84.78 today. The digital-payment service topped earnings and revenue expectations after the market closed yesterday.