Bullish option traders have tripled their money in Cisco as investors have rotated into large-cap tech names that had been underperforming.
On Sept. 13, Investitute’s proprietary programs found that 1,500 Weekly $31.50 calls that expired this afternoon were purchased for $0.67 as part of a bullish roll with shares at $32.02. This was clearly a new position, as volume was more than twice the open interest in the strike before the trade occurred.
Those calls sold for $1.99 today, triple their original price. The stock rose 4.7 percent in the same time frame, showing how quickly options can far outpace gains in 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.
CSCO was up 2.05 percent to $33.37 today. The networking giant has been rebounding in the last month from levels near its 52-week lows.