$MRVL bulls see stratospheric gains

Upside option positions in Marvell Technology skyrocketed on merger news today.

Way back on May 9, Investitute’s market scanners detected the purchase of 9,000 January $17 calls in one print for $0.91 with shares at $15.41. This was clearly a new position, as volume was well above the strike’s open interest of 6,918 contracts.

Today those calls traded for $14.35, more than 15.5 times their purchase price. The stock rallied 38.6 percent in the same time frame, a huge gain but still nowhere near that of its options.

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.

MRVL jumped 6.41 percent to $21.59 today. The chip maker surged after announcing plans to buy rival Cavium for $6 billion.