$CSCO bulls post enormous profits

Option traders racked up exponential gains in Cisco today thanks to strong quarterly results.

On Dec. 21, Investitute’s tracking systems detected the purchase of 11,500 March $40 calls for $0.77 as part of a bullish spread with shares at $38.75. This was clearly a new position, as volume was well above the strike’s open interest of 8,006 contracts.

Those calls traded up to $5.20 today, nearly 7 times their purchase price. The stock rose 16.1% in the same time period, underscoring 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.

CSCO was up 0.57% to $44.33 today. The networking giant’s stock reached its highest level since the dot-com era after topping quarterly estimates Wednesday evening.