$SNAP call prices soar 8-fold

Cheap bullish bets made on Snap a month ago paid enormous returns today.

On Jan. 3, Investitute’s market scanners identified the purchase of 12,500 February $7 calls in one print for $0.25 with shares at $5.69. This was clearly a new position, as volume was far above the strike’s previous open interest of 2,187 contracts.

Those calls traded for as much as $2.10 today, more than 8 times their purchase price. The stock soared 59.75% in the same time period, a huge move but still nowhere near that of its options on a relative basis. Investitute co-founder Jon Najarian updated the trade today on CNBC’s “Halftime Report.”

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.

SNAP spiked higher by 22.02% to $8.59 today. The heavily shorted social-media stock rallied after the company topped earnings and usage estimates last night.