$AMAT bulls score big overnight

Option traders turned exponential profits today on upside positions opened in Applied Materials just one session earlier.

Late yesterday afternoon, Investitute’s market scanners identified the purchase of 13,000 July $48 calls for $0.20 to $0.31 with shares at $47.34. This was clearly fresh buying, as volume was far above the strike’s open interest of 4,659 contracts.

Those calls traded for $1.28 this morning, more than 6 times their initial purchase price. The stock rose 3.68% at the same time, 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.

AMAT was up 2.07% today to close at $48.28. The chip-equipment maker is down sharply from its 52-week high of $62.40 reached in March, but analysts have recently expressed optimism over rising semiconductor demand from China.