$TWTR calls take flight

Option traders are making exponential gains on bullish positions opened in Twitter (TWTR) only last Friday.

On Sep. 18, our Unusual Activity Service detected the purchase of 2,500 Weekly $42 calls expiring this Friday, Sep. 25, for $0.40 to $0.49 with shares at $39.76. This was clearly fresh buying, as open interest in the strike was only 907 contracts before that session began.

Those calls have traded for as much as $4.50 so far today, 10 times their average purchase price. The stock rose 16.78% in the same time frame, illustrating the kind of leverage that can be achieved 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.

TWTR is up 8.52% to $46.37 in mid-session trade. The social-media company’s shares were upgraded at Pivotal Research this morning to a Buy from Hold along with a raised price target to $59.75 from $36.