$SQ keeps paying off for bulls

Option traders nearly quadrupled their money in Square today.

On Dec. 27, Investitute’s proprietary programs flagged the purchase of 7,500 June $65 calls for $4.75 as part of a bullish roll with shares at $53.11. This was clearly a new position, as open interest in the strike was only 619 contracts before that session began.

Those calls traded for as much as $18 today, almost 4 times their purchase price. The stock soared 47.05% in the same time period, a huge move but still nowhere near that of its options on a relative basis. It was the third winning trade in SQ posted on Investitute in the last two weeks.

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 jumped 5.45% to $77.97 today.  The electronic-payment service initially pulled back after rival Fiserv (FISV) announced on Jan. 16 that it was purchasing First Data (FDC), but KeyBanc said Square would not be threatened by the merger.