$VMW bulls triple their money

Option traders more than tripled their money in VMware today as undesirable merger worries were removed.

On May 24, Investitute’s tracking systems flagged the purchase of 2,500 July $150 calls for $3.80 with shares at $137.54. Open interest in the strike was only 1,784 contracts before the trade occurred, showing that it was a new position. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $13.48 today, more than 3.5 their initial purchase price. The stock rose 18.3% in the same time frame, underscoring how 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.

VMW rocketed higher by 10.24% to close at $162.02 today. The information technology company’s shares outperformed after Dell Technologies announced it would remain an independent public company, relieving VMware shareholders, who had concerns about merging with a technology conglomerate.