$NXPI option bulls turn fast profits

Option traders are turning fast profits in call positions opened yesterday on NXP Semiconductors NV (NXPI).

On Oct. 22, Market Rebellion’s Unusual Activity Service found that 2,300 Weekly $235 calls, expiring Oct. 25, were bought for $1.67 to $1.97 with shares at $230.23. This was clearly fresh buying, as open interest in the contract before the activity appeared was just 81.

Those calls have sold for as much as $6.15 today, a 212.18% return, while the stock rose 3.81% in the same time period, underscoring how 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.

NXPI was last up 2.42% to $237.12 in afternoon trading.