$MXIM bulls quadruple money

Upside option positions have posted huge gains in chip maker Maxim Integrated Products .

On Oct. 6, Investitute’s market scanners identified the purchase of 2,200 February $50 calls for $1.80 to $1.90 with shares at $48.58. This was clearly fresh buying, as open interest in the strike was only 408 contracts before the activity appeared.

Those calls were marked at $8.35 yesterday, more than 4.5 times its original purchase price. The stock rose 19.3% in the same time period, illustrating 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.

MXIM jumped 4.23% to $57.95 yesterday. The circuit manufacturer spiked higher after strong quarterly results late last month.