Bulls cash in on Western Digital

Traders doubled their money after Western Digital reported strong quarterly results today.

On March 24, Investitute’s proprietary systems detected the purchase of 3,200 May $80 calls for $4.20 to $5 while shares traded for $80.47. This was clearly new positioning, as open interest in the strike was only 107 contracts before the activity appeared.

Those calls surged well above $9.50 early today, about double the price of the original premiums. The stock gained 10.7 percent in that same time frame, far below the percentage jump of the options, showing the kind of leverage that they can provide.

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.

WDC rose 3.92 percent to finish the day at $89.07, an all-time closing high, after hitting a lifetime intraday peak of $91 in the morning. The digital-storage company beat earnings and revenue estimates, as well as exceeding expectations for its outlook.