$SQ bulls make fast profits

It took only three sessions for bullish option traders to run up fast profits in Square (SQ).

On Nov. 17, Market Rebellion’s Unusual Activity tracking systems found that 2,200 Weekly $185 calls expiring on Nov. 27 were bought for $3.80 to $5.50 with shares at $183.80. This was clearly fresh buying, as open interest in the strike was only 930 contracts before the activity appeared.

Those calls have traded up to $15.50 today, over 3 times their average purchase price. The stock rose 8.62% 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 was last up 3.59% to $198.69 today. The electronic-payment service’s price target was raised to $300 from $225 at Mizuho yesterday.