$AMD call prices soar 5-fold

Advanced Micro Devices (AMD) ripped higher this week, turning huge profits on bullish option positions.

On May 31, Investitute’s market scanners found that 6,000 Weekly $29 calls expiring on June 14 were bought for $0.66 to $0.91 with shares at $28.29. This was clearly fresh buying, as open interest in the strike was only 547 contracts before that session began. Investitute co-founder Pete Najarian cited unusual activity in the same strike just one session earlier on CNBC’s “Halftime Report.”

Those calls traded up to $3.65 about 30 minutes before today’s closing bell, more than 5 times their initial purchase price. The stock rose 15.1% in the same time frame, illustrating the kind of leverage that can be achieved with options.

It is the third winning trade in the name posted on Investitute in the last two weeks.

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 was up 1.85% to $32.41 today. The stock broke out this week after Morgan Stanley upgraded the chip maker to “equal weight” from “underweight,” acknowledging that it had been mistakenly bearish on the name.