Calls stack up as $CY rallies

Option traders posted substantial gains on upside positions in Cypress Semiconductor before they expired today.

On Jan. 12, Investitute’s proprietary systems flagged the purchase of 5,200 March $17 calls for $0.85 to $1.02 with shares at $17.08. Volume was far above the strike’s open interest of 2,558 contracts, indicating that this was fresh buying.

Those calls traded for $1.70 today, double their original purchase price. The stock rose 9.4% in the same time period, illustrating the kind of leverage that can be achieved 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.

CY was up 1.03% today to close at $18.60. The chip maker has rallied as the semiconductor industry has rebounded in recent weeks.