$SQ calls turn quick profits

Bullish option traders more than doubled their money in Square today.

On June 7, Investitute’s tracking systems detected the purchase of 24,900 July $65 calls for $1.45 as part of a bullish spread with shares at $60.41. This was clearly a new position, as volume was far above the strike’s open interest of 2,237 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $3.86 today, more than 2.5 times their purchase price. The stock rose 9.6% in the same time frame, underscoring 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.

SQ was up 2.6% today to close at $66.19. Shares popped after New York state regulators allowed payments through the social-media network to be used for trading Bitcoin and other cryptocurrencies.