$ZEN bulls post big gains

Option traders have doubled their money on bullish positions in Zendesk (ZEN).

On Dec. 11, Market Rebellion’s tracking systems detected the purchase of 11,138 February $85 calls for $2.65 as part of a bullish spread with shares at $72.88. This was clearly fresh buying, as open interest in the strike was 83 contracts before the trades occurred.

Those calls sold for as much as $5.90 today, more than twice their purchase price. The stock rose 20.66% 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.

ZEN closed up by 1.73% at $87.88 today. The software company is scheduled to report earnings on Feb. 6 after the market closes.