Option traders have racked up huge returns on bullish positions in networking companies recently, and Gigamon is no exception.
On May 3, Investitute’s tracking systems detected the purchase of 7,600 July $35 for $0.70 to $1 with shares at $30.95. These were clearly new positions, as open interest in the strike was only 303 contracts before the trades occurred.
Those calls were listed at $8.30 today, representing a profit of at least 730 percent. The stock rallied 38.4 percent in the same period, a large move but one that still pales in comparison to that of the options.
Long calls lock in the price where the 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.
GIMO rallied 9.03 percent to close at $42.85 today. The networking and cybersecurity company surged May 8 after receiving a major investment from activist group Elliott Management and has continued to rally after strong quarterly results from leaders in the industry, such as Ciena and Palo Alto Networks.