$NVDA calls double overnight

Option traders posted substantial gains in Nvidia today, only one session after opening bullish positions in the name.

Just yesterday, Investitute’s tracking systems found that 6,900 Weekly $290 calls expiring this Friday were purchased for $1.60 to $3.65 with shares at $289.21. These were clearly new positions, as open interest in the strike was far above the strike’s open interest of 2,739 contracts. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $5.40 this morning, more than twice their average purchase price. The stock rose 1.2% at the same time, showing how quickly options can far outpace gains in 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.

NVDA reached a 52-week high of $292.75 this morning before pulling back to close at $286.48, down 1% on the session. Evercore ISI raised its price target on the graphics-chip maker to $400 from $300 last Friday.