Bulls score again in $MLNX

Option traders are racking up large profits in Mellanox for the second time in recent days, this time on the company’s proposed acquisition by Nvidia.

On Feb. 25, Investitute’s marke scanners identified the purchase of 5,000 March $115 calls for $1.60 as part of a bullish spread with shares at $106.44. This was clearly a new position, as volume was well above the strike’s previous open interest of 2,210 contracts.

Those calls traded for as much as $4.40 today, almost triple their purchase price. The stock rose 11.83% in the same time frame, showing how quickly options can far outperform their underlying shares.

It is the second winning trade in the name posted on Investitute in as many weeks. On Feb. 28 we updated the 18April $110 calls cited by Investitute cofounder Jon Najarian earlier in the month on CNBC’s “Halftime Report.” Those options traded at $10 this morning, also nearly tripling in value.

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.

MNLX surged 7.78% to $117.89 today. The stock surged this morning after NVDA management confirmed plans to purchase the semiconductor company for about $6.9 billion. (See related story on winning trade in Nvdia)