$AVGO calls quadruple overnight

Option traders collected large profits in Broadcom today, only one session after opening bullish positions in the chip maker.

Yesterday afternoon, just hours before the company reported earnings, Investitute’s market scanners identified the purchase of 3,200 March $270 calls for $6.55 to $7.75, including one print of 3,000 for $7.40, with shares at $272.14. This was clearly fresh buying, as open interest in the strike was only 1,369 contracts before the activity appeared.

Those calls traded for as much as $29.36 today, 4 times their average purchase price. The stock rose 10% at the same time, illustrating the kind of leverage that can be achieved quickly with options.

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 jumped to an all-time high of $299.50 this morning and finished the day at $290.29, up 8.24% on the session. Broadcom beat quarterly estimates on the top and bottom lines after the market closed yesterday.