Chip bulls stack up gains in $MU

Micron Technology has climbed sharply this week, yielding exponential profits on upside option positions.

On May 10, Investitute’s tracking systems found that 3,000 Weekly $55 calls expiring on June 1 were purchased for $1.52 with shares at $52.38. This was clearly a new position, as open interest in the strike was only 1,102 contracts before that session began. Investitute co-founder Pete Najarian mentioned the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $7.10 today, more than 5 times their purchase price. The stock rose 18.6% in the same time frame, showing 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.

MU spiked to $62.10 this morning before pulling back to close at $61.33, off 0.26% on the session. The memory-chip maker has rallied from below $56 since its annual analyst day on Monday.