Applied Optoelectronics scores big

A bullish position opened in Applied Optoelectronics last week is already paying off exponentially.

On May 1, Investitute’s tracking systems found that 4,000 May 55 calls were purchased for $2.96 as part of a vertical spread with the stock at $50.96. Open interest in the strike was only 913 contracts before the trade occurred, showing that it was a new position.

Today those calls were bought for as much as $8.10, nearly tripling in value. Shares have gained about 22 percent in that same period, a hefty move but one that still pales in comparison to that of the calls.

Long calls lock in the price where the 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.

AAOI jumped 8.22 percent today to close at $62.11. The fiber-optic company posted blowout revenue numbers last Thursday and have been climbing since.