$AMAT call buyers turn quick profits

It took less than three sessions for traders to double their money in Applied Materials.

Last Thursday, Investitute’s tracking systems detected the purchase of 11,200 October $55 calls for $0.29 to $0.44 with shares at $53.60. Volume was far above the strike’s open interest of 3,042 contracts, indicating that this was fresh buying.

Those calls traded for $0.70 today, more than double their original purchase price. The stock rose only 2.7 percent in the same time frame, showing how quickly options can far outpace gains in their underlying shares. Investitute co-founder Pete Najarian cited the unusual option activity at the time on CNBC’s “Halftime Report.”

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.

AMAT was up 2.04 percent to $55.04 today. The chip-equipment maker has been pacing gains in the semiconductor industry all year.