FireEye yielded exponential returns on bullish option positions as it rallied with other cyber-security firms today.
Just last Friday, Investitute’s scanners showed that 2,400 May $15.50 calls were purchased for $0.05 to $0.14 with shares at $14.77. This was clearly fresh buying, as open interest in the strike was only 546 contracts before the activity appeared.
Those calls traded for $0.86 this afternoon, a gain of at least 500 percent only one session later. The stock was up less than 10 percent in the same time, underscoring how 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.
FEYE jumped 7.51 percent to $15.90 today. Digital-security companies surged in response to the global “WannaCry” ransomware attack throughout the session.
It was the second winning option trade for FireEye in recent weeks. Long calls paid off after the firm reported strong quarterly results earlier this month.