Option traders have doubled their money in Teradyne ahead of quarterly results this week.
Last Tuesday, Investitute’s proprietary programs cited the purchase of 10,300 February $47 calls for $1.10 to $1.30, with shares at $45.46. These was clearly fresh buying, as open interest in the strike was only 99 contracts before the trades occurred. Investitute co-founder Jon Najarian cited the unusual activity at the time on CNBC’s “Halftime Report.”
Those calls sold for $2.35 at the end of today’s session. The stock rose 5.1 percent in the same time frame, illustrating the kind of leverage that can be achieved 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.
TER was up 0.74% to $47.77 today. The chip-testing equipment maker reports earnings on Wednesday after the market closes.