Call prices surge sixfold in $CRM

Bullish option traders earned big profits today on strong quarterly results from Salesforce.com.

On Dec. 5, Investitute’s tracking systems showed that 5,000 Monthly $110 calls expiring on Mar. 16 were purchased for $2.10 to $2.71 with shares at $100.37. This was clearly fresh buying, as volume was well above the strike’s open interest of 2,149 contracts.

Today those calls traded as high as $12.75, more than 6 times their original purchase price. The stock rose just 22% percent in the same time frame, a large move but nowhere near that of its options, underscoring how quickly 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.

CRM rose 2.74 percent today to close at $119.50. The cloud-software company rallied after topping earnings and revenue estimates last night while raising guidance.