$SDC bulls are smiling

Option traders who opened bullish positions in SmileDirectClub (SDC) one week ago are racking up large gains today.

On Mar. 19, Market Rebellion’s Unusual Activity programs found that 2,300 Weekly $5 calls expiring on Apr. 3 were bought for $0.21 to $0.30 with shares at $4.18. Volume was well above the strike’s existing open interest of 8 contracts, indicating that this was fresh buying.

Those calls have so far traded for as much as $2.00 today, at least 6.5 times their purchase prices. The stock rose 63.4% at the same time, showing how quickly options can far outpace gains in 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.

SDC rose to an intraday high of $6.86 earlier this session and was last up 35.98% at $5.82. Shares of the teledentistry company have risen sharply today while Americans continue to practice “social distancing.”