$TSLA calls double overnight

Shares of Tesla (TSLA) gapped higher this morning delivering fast gains to upside option positions.

Just yesterday, Oct. 7, Market Rebellion’s Unusual Activity scanners showed that 9,000 Weekly $420 calls expiring tomorrow, Oct. 9, were purchased for $6.00 to $10.50 with shares at $414.24. These were clearly new positions, as the open interest in that contract before the trade occurred was just 4,361.

Those calls traded for as much as $20.00 so far this morning, at least about double their purchase prices. The stock surged 5.98% in the same time period, a huge move but still nowhere near that of its options on a relative basis.

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 was last up on the day by 1.19% at $430.37. The electric car maker’s stock was upgraded to a Buy from Neutral at New Street yesterday afternoon.