Ciena plugs traders into big gains

Bullish option traders turned huge profits after Ciena posted strong quarterly results today.

On April 17, Investitute’s market scanners found that 5,100 June $22 calls were purchased for $1.26 to $1.34 with shares at $21.80. These were clearly new positions, as volume dwarfed the strike’s open interest of just 11 contracts.

Those calls sold for $5.20 today, a profit of some 300 percent. The stock gained 24.7 percent in the same period, showing how far options can 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.

CIEN surged 15.8 percent to $27.19 today. The network-technology company gapped up from below $24 after beating quarterly projections on the top and bottom lines this morning while issuing guidance that exceeded expectations.