Call prices surge fourfold in $CVS

CVS Health has been rallying since strong quarterly results last week, yielding huge returns on bullish option plays.

On Aug. 7, Investitute’s market scanners flagged the purchase of 5,000 August $66 calls for $1.30 to $1.35 as part of a bullish spread with shares at $65.52. This was clearly a new position, as open interest in the strike was only 1,589 contracts before the trade occurred.

Those calls sold for $5.67 this afternoon, more than 4 times their purchase prices. The stock rose 9.31% in the same time frame, showing how quickly 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.

CVS was up 2.71% to $71.38 today. The drugstore chain surpassed expectations on the top and bottom lines last week.