$Z calls prices rocket fivefold

Option traders doubled down on bullish bets in Zillow (Z) a few weeks back, and those positions are paying off big today.

Investitute’s tracking systems detected unusual option activity in the same strike on two consecutive sessions last month.

–On May 16, 2,850 June $45 calls were purchased for $0.45 above open interest of 505 contracts with shares at $39.23.
–On May 17, 4,800 June $45 calls bought for $0.40 to $0.68 with shares at $40.58. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $2.90 today, more than 5 times their average purchase price. The stock rose 20.21% in the same time period, underscoring how options can far outperform their underlying shares.

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 reached a session high of $47.42 this morning before pulling back to $46.25 this afternoon, off 0.62% on the day. The real-estate company has rallied sharply since beating earnings estimates on May 9.