As Broadcom awaits word on its efforts to buy Qualcomm, option traders are already collecting large profits.
On Sept. 26, Investitute’s tracking systems found that 5,000 November $250 calls were bought for $4.80 with shares at $237.23. This was clearly a new position, volume was well above the strike’s open interest of 1,551 contracts.
Those calls traded up to $16.60 this afternoon, 3.5 times their purchase price. The stock rose 12.4 percent in the same time frame, underscoring the type of leverage that can be obtained 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.
AVGO was up 0.89 percent today to close at $265.60. Broadcom rose sharply last week on reports that it would seek to acquire rival chip maker Qualcomm. The company is estimated to report earnings numbers on Dec. 7 after the market closes.
Option traders have already logged stratospheric gains on bullish positions in QCOM.