$ON bulls double their money

A well-timed option trade in On Semiconductor has yielded significant returns.

On June 29, Investitute’s proprietary programs flagged the purchase of 2,000 August $24 calls for $0.50 and $0.55 as part of a bullish roll with shares at $22.44. Open interest in the strike was a mere 58 contracts before the trade occurred, showing that this was a new position.

Those calls sold for $1 this afternoon, twice their initial purchase price. The stock rose 4.72% in the same time frame, 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.

ON was up 2.13% to $23.51. today. At the time those August calls were purchased, the chip maker began a sharp rebound from the same level where it bounced in early May.