$VMW calls log large gains

Bullish option traders scored sizable profits in VMware (VMW) during today’s session.

On Feb. 28, Market Rebellion’s Unusual Activity programs flagged the purchase of 4,500 July $140 calls for $6.10 to $6.30 as part of a bullish combo, selling an equivalent number of downside puts, with shares at $123.19. This was clearly fresh buying, as open interest in the strike was only 58 contracts before that session began.

Those calls traded up to $12.30 today, more than 2 times their average purchase price. The stock rose 22.37% in the same time, showing 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 was last up 2.73% to $150.50. The cloud-technology company’s shares have risen sharply after Dell (DELL) announced it was looking into options for its stake in the company.