$MU bulls quadruple their money

Micron Technology surged today, yielding exponential profits on upside option positions.

On May 10, Investitute’s tracking systems found that 2,000 Weekly $54.50 calls expiring this Friday were purchased for $1.45 with shares at $52.38. This was clearly a new position, as open interest in the strike was only 139 contracts before that session began. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $6.01 today, more than 4 times their purchase price. The stock rose 15.4% in the same time frame, 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.

MU jumped 6.4% to $59.03 today. The memory-chip maker announced a $10 billion stock-buyback program after the market closed yesterday, leading 19 analysts to raise their price targets.