Bulls score again with $ADI

Option traders collected big profits on upside positions in Analog Devices (ADI) today for the third time in the last five sessions.

On Nov. 26, our Unusual Activity Service detected the purchase of 3,600 January $115 calls for $2.90 to $3.10 with shares at $113.27. This was clearly fresh buying, as open interest in the strike was only 754 contracts before that session began. Market Rebellion co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for as much as $5.50 so far today, nearly twice their initial purchase price. The stock rose 4.85% in the same time frame, underscoring how quickly options can far outperform their underlying shares.

It is the third winning trade in the name posted on Market Rebellion since Dec. 11.

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.

ADI jumped to $119.41 early today but has pulled back to $118.51 this afternoon, off 0.29% on the session. The chip maker has rebounded since missing quarterly results in late November.