$SQ call prices surge fivefold

Option traders are cashing in on Square as shares trade near all-time highs,

On May 8, Investitute’s tracking systems detected the purchase 5,900 July $60 calls for $1.50 to $1.77 with shares at $52.21. This was clearly fresh buying, as open interest in the strike was only 407 contracts before the activity appeared. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $7.55 today, 5 times their initial purchase price. The stock rallied 29.1% in the same time period, a large move but nowhere near that of its options. It was the second winning trade in SQ posted on Investitute in less than a month.

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.

SQ was up 2.98% to $67.28 today. The electronic-payment service, which began a long and steady climb after its last quarterly results in early May, is scheduled to release its next earnings report on Aug. 1 after the market closes.