$NXPI calls double on new bid

Qualcomm sweetened its offer for NXP Semiconductors today, handing big gains to upside option traders.

On Oct. 11, Investitute’s market scanners identified the purchase of 10,300 April $120 calls for $3.60 to $3.80 with shares at $115.40. These were clearly new positions, as open interest in the strike was only 341 contracts before that session began.

Those calls traded up to $7.30 today, more than twice their original purchase price. The stock rose 8.9% in the same time period, 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.

NXPI jumped 5.96% to $125.56 today. The chip maker rallied after Qualcomm raised its bid by 16% in an effort to acquire the Dutch company this morning.