$NUAN rewards patient bulls

Option traders who opened upside positions in Nuance Communications the day after Christmas are now logging exponential gains.

On Dec. 26, Investitute’s proprietary programs flagged the purchase of 5,870 18April $15 calls for $0.55 to $0.60 with shares at $12.97. This was clearly a new position, as open interest in the strike was only 1,036 contracts before that session began.

Those calls were marked at $2.15 at today’s closing bell, more than 3 times their purchase prices. The stock rallied 31.97% in the same time period, a large move but nowhere near that of their options on a relative basis.

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.

NUAN was up 1.12% to $17.12 today. Shares of the voice-recognition technology company have risen more than 30% this year and may be trying to break resistance that has been in place since last November.