$VMW calls score big in one day

It took less than one full session for bullish option traders to post large gains in VMware.

On Friday, Investitute’s proprietary programs flagged the purchase of 2,000 June $125 calls for $6.80 to $7.10 with shares at $121.59. These were clearly new positions, as open interest in the strike was only 25 contracts before the activity appeared.

Those calls traded for $10.85 today, a gain of 60% just one session later. The stock rose 6.8% at the same time, 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.

VMW jumped 5.29% to $127.76 today. Shares rallied on a Bloomberg report that Dell Technologies might not seek a reverse merger with the business-software company.