$PAGS bulls triple money

Upside calls bought in PagSeguro Digital (PAGS) just over two weeks ago are paying off for option traders before its earnings report.

On May 12, Market Rebellion’s Unusual Activity Service found that 9,000 June $32.50 calls were bought for $0.79 to $1.00 with shares at $27.69. This was clearly fresh buying, as open interest in the strike was only 1,230 contracts before the activity appeared.

Those calls traded for as much as $2.85 today, triple their average purchase price. The stock rose 18.31% in the same time frame, a large move but nothing like that of its options on a relative basis.

This is the second winning trade in the name posted on Market Rebellion in the last two weeks.

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.

PAGS ended the day to close up 7.69% at $30.26. The mobile payment operator, based in Brazil, had its price target raised to $32 from $20 at KeyBanc this morning and will report earnings for its first quarter after the market closes tomorrow, May 28.