$TWLO bulls turn quick profits

Option traders more than doubled their money on upside positions opened in Twilio at the end of last week.

On Aug. 3, Investitute’s tracking systems detected the purchase of 5,000 January $70 calls for $5.70 as part of a bullish spread with shares at $61.29. This was clearly a new position, as volume was well above the strike’s open interest of 1,529 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $14 this morning, about 2.5 times their purchase price. The stock rose 26.1% in the same time frame, a large move but still far below that of its options on a relative basis.

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.

TWLO surged 18.7% to $75.10 today. The cloud-communications company reported a surprise profit and surpassed revenue expectations after the market closed yesterday.