$Z call prices skyrocket 7-fold

Option traders are reaping exponential profits on bullish positions opened in Zillow (Z) just after Christmas.

On Dec. 27, Market Rebellion’s Unusual Activity Service identified the purchase of 3,000 February $50 calls for $2.35 to $2.40 with shares at $46.09. This was clearly fresh buying, as open interest in the strike was only  755 contracts before that session began.

Those calls have traded for as much as $16.60 so far today, about 7 times their purchase prices. The stock rose 44.15% in the same time period, a huge move but 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.

Z is up 19.24% to $64.95 in midday trading. The real-estate company’s revenues topped estimates after the market closed yesterday.