$AVGO bulls score huge win

Option traders quadrupled their money on upside positions opened in Broadcom barely one week ago.

On Aug. 30, Investitute’s market scanners found that 3,300 Weekly $220 calls expiring today were purchased for $3.59 to $3.69 with shares at $216.88. These were clearly new positions, as open interest in the strike was only 985 contracts before the activity appeared.

Those calls traded up to $15.10 today, more than 4 times their purchase price. The stock rose 8.41% in the same time frame, underscoring how quickly options can far outperform their underlying shares. It was one of four bullish AVGO trades in the five sessions leading up to the company’s quarterly results last night.

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.

AVGO jumped 7.69% to $232.58 today. The communications-chip maker surpassed expectations on the top and bottom lines after the market closed yesterday, prompting a raft of analyst upgrades.