$SQ call buyers turn fast profits

Option traders have nearly doubled their money on upside positions opened in Square only a few days ago.

On Jan. 8, Investitute’s market scanners identified the purchase of 4,900 January $63 calls for $2.84 to $3.05 with shares at $63.17. This was clearly fresh buying, as volume was far above the strike’s open interest of 2,014 contracts before the trades occurred. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $5.20 this morning, almost twice their initial purchase price. The stock rose 6.81% 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.

SQ was up 0.2% to $66.23 today. According to a report released on Jan. 8, Nomura Instinet said the electronic-payment service could benefit meaningfully from business for the ticket company Eventbrite (EB).