Traders cash in as $MU hits 52-week high

Bullish option activity has been building in Micron for months, and today traders pocketed huge profits in expiring positions.

On Aug. 8, Investitute’s market scanners identified the purchase of 7,500 September $30 calls for $1.21 as part of a bullish spread with shares at $29.22. Volume was above the strike’s open interest of 5,570 contracts, showing that this was a new position.

Today those calls sold for as much as $4.97, more than four times their original price. The stock was up 19.6 percent in the same time frame, illustrating the kind of leverage that can be obtained with options. This was just one of several bullish trades in Micron recently, as noted by Investitute co-founder Jon Najarian on CNBC’s “Halftime Report” last month.

Long calls lock in the price where a 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.

MU was up 0.2 percent to close at $34.65 after hitting a 52-week high of $35 in the morning. The memory-chip maker pulled back a month ago but then rebounded sharply and broke through key resistance levels.