$NTAP call buyers rack up profits

NetApp has rebounded sharply this month, handing large gains to upside option traders.

On Jan. 11, Investitute’s tracking systems identified the purchase of 2,000 June $60 calls for $5.70 as part of a bullish spread with shares at $61.69. This was clearly a new position, as open interest in the strike was a mere 67 contracts before that session began.

Those calls traded as high as $10, nearly twice their purchase price. The stock rose 11.5% at the same time, 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.

NTAP reached a 52-week high of $68.79 early this morning before pulling back with the broader market to close at $67.47, off 0.15% on the session. Late last week the data-management company announced a $4 billion stock-buyback program and raised its dividend to $0.40 from $0.20.