$RMBS bulls triple money

Option traders scored quick profits today on upside positions opened in Rambus (RMBS) at the end of last week.

On Sept. 13, Market Rebellion’s activity scanners identified the purchase of 4,400 September $14 calls for $0.04 to $0.15 with shares at $13.45. This was clearly fresh buying, as open interest in the strike was only 1,503 contracts before the activity appeared.

Those calls traded for as much as $0.30 this morning, more than 3 times their average purchase price. The stock rose 5.06% 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.

RMBS is up 0.49% to $13.76 in midday trade. The chip designer traded up to $14.14 early this morning after hosting its financial analyst day.