$NVDA calls quadruple in days

It took only three sessions for bullish option traders to rack up large profits in Nvidia (NVDA).

On Tuesday, Mar. 24, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,300 Weekly $250 calls for $1.72 to $4.65 with shares at $237.01. This represented fresh buying, as open interest in the strike was 1,053 contracts before the trades appeared.

Those calls have traded for as much as $14.95 so far today, about 4.5 times their average purchase price. The stock rose 10.62% at the same time, underscoring 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.

NVDA is up 5.51% to $259.16 this afternoon. Wedbush added the graphics-chip maker to its “Best Ideas List” this morning, with an Outperform rating and $311 price target.