$CRM calls rocket into the clouds

It took barely a week for bullish option traders to triple their money in Salesforce.com

On Oct. 23, Investitute’s tracking systems showed that 4,000 Weekly $100 calls expiring on Nov. 10 were purchased for $0.93 to $1.07 with shares at $98.88. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,534 contracts. Investitute co-founder Jon Najarian cited the unusual activity that day on CNBC’s “Halftime Report.”

Those calls finished today’s session marked at $3, more than triple their original purchase price. The stock rose just 3.5 percent in the same time frame, underscoring how quickly options can far 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.

CRM rose 1.63 percent today to close at $102.34. The stock rallied after Guggenheim initiated coverage on the name with a “buy” rating and $125 price target, calling it the “most compelling” play in the cloud-computing space.