$MU bulls log fast profits

Option traders are logging exponential gains on upside positions in Micron (MU) today on positions opened just last Friday.

On Sep. 11, Market Rebellion’s Unusual Activity tracking systems found that 5,200 September $47 calls were bought for $0.40 to $0.76 with shares at $46.10. This was clearly fresh buying, as open interest in the strike was only 1,985 contracts before the activity appeared.

Those calls traded for as much as $2.75 today, about 4.5 times their average purchase price. The stock rose 6.83% in the same time frame, illustrating 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.

MU was up 6.38% to close at $49.03 today. The memory-chip maker was upgraded to a Buy from Neutral at Goldman Sachs this morning.