Owning calls locks in the price where the investor can buy stock. They can generate some nice leverage in event of a rally, but will lose money if the stock fails to move or declines.
Yelp’s shares rose 3.09 percent to $27.05 on Friday and are up 21 percent in the last month. Short interest represents one-quarter of the float in the social-media and e-commerce stock, despite repeatedly strong financial reports. That could help draw buyers and squeeze the stock higher.
Calls outnumbered puts by about 4,700 to 1,380 in the session, a reflection of the bullish sentiment.
—By CNBC Contributor David Russell
Additional News: Facebook Moves Into E-Commerce, Tests Facebook Gifts
Additional Views: Bulls Look for Herbalife to Bounce: Russell
Options Trading School:
David Russell is a reporter and writer for OptionMonster. Russell has no positions in YELP.