$MU bulls triple their money

Option traders are logging exponential gains on upside positions in Micron (MU) ahead of quarterly results tomorrow.

On Nov. 21, our Unusual Activity Service detected the purchase of 2,000 December $45.50 calls for $2.77 as part of a bullish roll with shares at $45.93. This was clearly a new position, as open interest in the strike was only 390 contracts before that session began. Market Rebellion co-founder Jon Najarian cited even more buying in MU calls that expire later this month on CNBC’s “Halftime Report” yesterday.

Those calls have traded for as much as $8.25 so far today, about 3 times their purchase price. The stock rose 15.76% in the same time frame, illustrating how quickly 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 is up 0.34% to $53.12 this morning. The memory-chip maker has drawn several analyst upgrades ahead of its earnings report tomorrow afternoon, most recently a price-target bump to $70 from $60 at Needham this morning.