$AMD call prices spike 12-fold

Advanced Micro Devices continued its torrid run higher today, handing exponential profits to bullish option traders.

On April 24, Investitute’s tracking systems detected the purchase of 3,200 June $14 calls for $0.09-$0.10 with shares at $10.28. Volume was well above the strike’s open interest of 2,031 contracts, indicating that this was fresh buying. Investitute’s co-founder Pete Najarian cited unusual call buying in the name one session earlier on CNBC’s “Halftime Report.”

Those June $14 calls sold for $1.10 this morning, more than 12 times their initial purchase price. The stock rallied 45.4% in the same time period, 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.

AMD was up 3.13% to $14.85 today. The chip maker, which has been ripping higher since reporting earnings on April 25, was upgraded by Stifel on Friday to “buy” from “hold” with a price target raised to $17 from $14.