$ON bulls quadruple their money

On Semiconductor (ON) yielded exponential gains on upside option positions today.

On Sept. 19, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,750 January $20 calls for $0.85 to $0.95 with shares at $19.73. This was clearly fresh buying, as open interest in the strike was only 1,784 contracts before the activity appeared.

Those calls have traded for as much as $4.02 so far today, more than 4 times their initial purchase prices. The stock rose 21.44% in the same time frame, 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.

ON is currently up 0.15% to $23.84 today. The chip maker made a new 52-Week high of $24.03 earlier in the session after competitor Micron (MU) reported better-than-expected earnings results last night.