Bulls cash in chips on $SMH calls

Chip bulls are seeing their patience be rewarded today in upside call positions on the VanEck Vectors Semiconductor Fund (SMH).

On Apr. 13, Market Rebellion’s Unusual Option Activity Service identified the purchase of 6,900 January $145 calls for $6.95 to $7.10 with shares at $123.31. This represented fresh buying, as volume was well above the strike’s previous open interest of 424 contracts.

Those calls were last marked for $46.10 today, about 6.5 times their purchase prices. The stock rose 54.29% in the same time period, underscoring how 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.

SMH was last up 1.93% for the day at $190.26. The exchange-traded fund, along with its top holding, Taiwan Semiconductor (TSM), has risen to new all-time highs today.