Bulls are in the chips with $ADI

Option traders have racked up large profits on upside positions in semiconductor maker Analog Devices (ADI).

On Oct. 28, Market Rebellion’s Unusual Activity Service detected the purchase of 3,200 December $110 calls for $3.50 and $3.55 with shares at $108.47. This was clearly fresh buying, as volume was well above the strike’s existing open interest of 1,250 contracts.

Those calls are marked at $6.75 this morning, about twice their initial purchase price. The stock rose 7.16% in the same period, underscoring how quickly options can far outperform 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.

ADI is up 1.63% to $116.26 so far today. The circuit manufacturer’s shares are up sharply since the company reported earnings in late November.