Bullish Action Lights Up Cree

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Cree has been rampaging higher, and the bulls jumped in yesterday.

OptionMonster's tracking programs detected the purchase of some 5,000 December 62.50 calls for $8.65 and the sale of an equal number of December 70 calls for $5.40. Volume was more than five times open interest at both strikes, indicating that new positions were initiated.

Owning calls lock in the price where the stock can be bought, while selling them obligates the investor to unload shares if a certain level is reached. The combination gives the investor control of the spread between two prices at a low cost.

In this case, the trader paid $3.25 and will receive $7.50 if the stock closes at $70 on expiration. That would be a profit of 131 percent on a move of less than 20 percent in the share price.

Cree rose 0.94 percent to $60.41 yesterday and has rallied more than 75 percent since the beginning of 2013. It's a member of the light-emitting diodes industry, a small but fast-growing niche within the technology sector.

Total option volume in the name was seven times greater than average in the session, with calls accounting for more than three-quarters of the total.

—By CNBC Contributor David Russell

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David Russell is a reporter and writer for OptionMonster. Russell has no positions in CREE.