$SQ bulls collect fast profits

It took less than one week for bullish option traders to run up fast profits in Square (SQ).

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two consecutive sessions this week:

–On Jul. 6, 2,500 Weekly $130 calls expiring on Jul. 10 were purchased for $0.86 to $1.47 above open interest of 248 contracts with shares at $119.94.
–On Jul. 7, 3,400 more Weekly $130 calls expiring on Jul. 10 were purchased for $0.83 to $1.79 below open interest of 4,946 contracts, adding to the previous day’s volume, with shares at $120.37.

Those calls today traded up to $5.15, at least 2.5 times their purchase prices. The stock rose 11.16% in the same time period, illustrating the kind of leverage that can be achieved quickly 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.

SQ ended up 5.83% to $133.35 today. The electronic-payment service’s price target was raised to $150 from $83 at SunTrust on Monday.