Traders triple their money in $CSCO

Bullish option positions turned large profits today after Cisco broke a long losing streak in earnings reports.

On Nov. 9, Investitute’s market scanners found that 7,000 November $34.50 calls were puchased for $0.67 and $0.68 as part of a bullish spread with shares at $34.23. This was clearly a new position, as volume was far above the strike’s open interest of 2,786 contracts. Investitute co-founder Jon Najarian cited the unusual activity on CNBC at that time. (See graphic above.)

Those calls traded up to $2.13 this morning, more than 3 times their original purchase prices. The stock was up less than 7.5 percent in the same time frame, showing how quickly options can far outperform 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 rose 5.19 percent today to close at $35.88. The networking giant rallied after delivering positive guidance after the market closed yesterday, rising for the first time in eight quarterly reports.