$MLNX bulls turn quick gains

It has taken less than a week for option traders to post large profits in Mellanox Technologies.

On Feb. 19, Investitute’s market scanners found that 3,000 18April $110 calls were purchased for $3.50 as part of a bullish spread with shares at $99.76. There was no open interest in the strike before the trade occurred, showing that it was a new position. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $5.95 today, nearly twice their purchase price. The stock rose 8.22% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

MLNX hit a 52-week high of $108 in late-morning trading before pulling back to close at $106.34, still up 1.29% on the session. The semiconductor company has rallied sharply this year with the rest of the chip industry.