$AMAT bulls triple their money

Option traders have turned fast profits as Applied Materials has rebounded sharply in the last week.

On Feb. 9, Investitute’s tracking systems detected the purchase of 4,000 March $48 calls for $2.68 to $3 with shares at $47.75. There was no open interest in the strike before the activity appeared, showing that this was fresh buying.

Those calls traded as high as $9.33 today, 3.5 times their original purchase price. The stock rose 20% in the same time frame, underscoring how options can far outpace gains in their underlying shares.

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.

AMAT was up 3.15% to $56.66 today. The chip-equipment manufacturer topped quarterly results and provided strong guidance last Wednesday.