$LRCX bulls double their money

Lam Research helped spearhead the recent semiconductor rally, returning huge profits on upside option positions.

On Dec. 6, Investitute’s market scanners identified the purchase of 1,875 February $155 calls for $6 as part of a bullish spread with shares at $144.51. This was clearly a new position, as open interest in the strike was only 650 contracts before that session began.

Those calls traded for as much as $13.40 today, more than twice their purchase price. The stock rose 15.27% in the same time period, 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.

LRCX was up 0.34% to $166.06 today. The chip-equipment company topped quarterly estimates and announced a $5 billion share buyback last week.