Call prices soar 4-fold in $LLY

It has taken less than one month for bullish option traders to score huge profits in Eli Lilly (LLY).

On Dec. 17, Market Rebellion’s Unusual Activity Service identified the purchase of 3,000 February $125 calls for $3.43 as part of a bullish roll with shares at $123.75. Open interest in the strike was a mere 589 contracts before the trade occurred, showing that this was a new position.

Those calls have traded for as much as $13.80 so far today, more than 4 times their purchase price. The stock rose 11.65% in the same time frame, underscoring how quickly options can far outperform their underlying shares.

It is the second winning trade in the name to be posted on Market Rebellion over the past month.

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.

LLY is up 1.6% to $138.10 this afternoon following an announcement that it would acquire Dermira (DERM) for $18.75 per share.