$SONO call prices quadruple

Option traders posted large gains on bullish positions opened in Sonos (SONO) ahead of its earnings report.

On Oct. 22, Market Rebellion’s Unusual Activity Service detected the purchase of 5,100 December $17.50 calls for $0.85 to $1.05 with shares at $15.19. Volume was well above the strike’s open interest of 1,333contracts before the activity appeared, indicating that it was fresh buying.

Those calls have traded for as much as $4.60 today, more than 4 times their purchase prices. The stock rose 43.52% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a 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.

SONO has run up to $21.78 this morning, up 27.44% on the session and making new 52-Week highs after topping estimates in its earnings report delivered after the close yesterday.