$SPLK bulls win overnight

Splunk ($SPLK) returned major gains today on bullish option positions opened just one session earlier.

Yesterday on Dec. 22, Market Rebellion’s Unusual Activity scanners showed that 2,800 Weekly $180 calls expiring this Thursday were purchased for $0.69 to $0.95 with shares at $173.89. These were clearly new positions, as the open interest in that contract before the trade occurred was just 1,183.

Those calls traded up to $6.00 today, over 6 times their original purchase prices. The stock rallied 6.75% 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.

SPLK rose to close higher by 3.14% at $182.55 today. The data-analysis software company was initiated with a Buy and $196 price target at Rosenblatt on Thursday.