Xilinx has been ripping higher this week, leading to substantial returns for upside option positions.
On Wednesday, Investitute’s proprietary programs showed that 1,500 Weekly $61.50 calls that expired this afternoon were purchased for $0.42 to $1.06 with shares at $62.12. These were clearly new positions, as open interest in the strike was just 90 contracts before the activity appeared.
Today those calls traded for $2.78, representing an average profit of 275 percent in 72 hours. The stock was up only 3.4% at the same time, underscoring how quickly options can far outpace the performance of 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.
XLNX was up 0.81 percent to $64.75 today. The programmable-chip maker spiked higher on Wednesday after Morgan Stanley noted that Chinese tech giant Baidu, which uses Xilinx products, is building a new architecture based on artificial intelligence.