It took less than a week for upside option traders to quadruple their money in Arista Networks.
On Monday, Investitute’s tracking systems detected the purchase of 8,200 August $165 calls for $2.75 as part of a bullish spred with shares at $149.26. Volume was far above the strike’s open interest of 3,624 contracts, showing that this was a new position.
Today those calls traded up to $12, representing a profit of more than 330 percent. The stock rose 17.2 percent at the same time, underscoring how quickly 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.
ANET surged 19.44 percent to $172.05 today. The cloud-software company beat earnings estimates and issued guidance that exceeded analysts’ expectations after the market closed yesterday.