$TSLA bulls drive away with gains

Shares of Tesla opened higher this morning, delivering significant gains to upside option positions opened last week.

On October 16, Investitute’s market scanners showed that 4,000 Weekly $280 calls expiring on October 26 were purchased for $6.07 as part of a bullish spread with shares at $269.11. Although the new activity came through below the 4,548 open interest, this was apparently a new position, given past trading histories recorded by Investitute’s market scanners. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded traded for as much as $41.00 this morning, better than 6 times their purchase price. The stock surged 18.54% in the same time period, a huge move but still nowhere near that of its options on a relative basis. Today’s return came after the 26October $280 calls doubled overnight from their purchase and offered an opportunity to take half of the trade off the table and ride the rest with house money.

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.

TSLA gapped higher this morning to $321.00 and wound up settling up 9.14% on the session at $314.86. The electric car maker reported its most profitable quarter ever after the market closed yesterday.