$AMD call prices double

Advanced Micro Devices (AMD) shares have been trading sharply higher in recent months, turning huge profits on bullish option positions.

On Jan. 9, Market Rebellion’s Unusual Activity Service detected the purchase of 5,000 Weekly $50 calls expiring today for $1.24 to $1.71 with shares at $48.91. Volume was well above the strike’s previous open interest of 3,083 contracts, showing that these were new positions.

Those calls have traded up to $2.79 this morning, more than 2 times their initial purchase prices. The stock rose 7.91% 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.

AMD is currently lower in morning trading by 0.15% to $51.64. The semiconductor developer made a new all-time-high earlier this morning at $52.81 after its peer Intel (INTC) beat earnings expectations after the closing bell yesterday.