Patient $TER bulls post huge gains

Bullish option positions in Teradyne opened last summer are yielding gigantic returns.

Way back on July 5, Investitute’s market scanners found that 5,100 January $35 calls were purchased for $1.40 to $1.50 with shares at $30.83. These were clearly new positions, as open interest in the strike was only 481 contracts before that session began.

Those calls traded for $11.20 today, 8 times their original purchase price. The stock surged 49.6 in the same time period, a large gain but one that was still far below that of its options on a relative basis. The move occurred after Investitute co-founder Jon Najarian cited heavy buying the February $47 calls on CNBC’s “Halftime Report” just yesterday.

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.

TER rose 3.2 percent to $46.76 today. The chip-testing equipment maker is scheduled to report earnings on Jan. 24 after the market closes.