$CSCO calls spike 4-fold overnight

Option traders racked up exponential gains today on last-minute buying in Cisco Systems only one session earlier.

Just minutes before yesterday’s closing bell, Investitute’s tracking systems detected the purchase of 4,100 May $53.50 calls for $0.50 to $0.76 with shares at $52.38. Volume was well above the strike’s existing open interest of 2,099 contracts, indicating that this was fresh buying.

Those calls traded for as much as $2.88 today, more than 4.5 times their average purchase price. The stock rose 7.62% at the same time, showing how quickly options can far outperform gains in 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 jumped 6.66% to $55.93 today. The networking giant beating earnings and revenue estimates while raising its outlook after the market closed yesterday.