$LITE lights up with call buying

Option traders have nearly tripled their money in Lumentum.

On May 1, Investitute’s proprietary programs flagged the purchase of 1,450 June $52.50 calls at the same second for $3.97 and $4 with shares at $51.70. Open interest in the strike was only 386 contracts before the trade occurred, showing that it was a new position.

Those calls traded as high as $11.30 today, nearly 3 times their initial purchase price. The stock rose 22% in the same time frame, 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.

LITE jumped 3.42% to $63.55 today. The optical-networking products manufacturer beat earnings and revenue expectations last week.