$AVGO call buyers score big, fast profits

Option traders have are scoring big profits in upside positions opened on Broadcom (AVGO) last week.

On Dec. 12, Market Rebellion’s Unusual Option Activity Service found that 10,000 Weekly $210 calls, expiring Dec. 27, were bought for $1.00 to $1.15 with shares at $177.46. This was clearly fresh buying, as open interest in the contract was just 555 before the activity appeared.

Those calls have traded for as much as $37.65 today, a 3,173.91% return, while the stock rose 38.99% at the same time, showing how options can far outperform their underlying shares.

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.

AVGO was last higher by 6.79% to $240.06 in morning trading.