$CNC call price spike 7-fold

Bullish option traders are posting exponential gains in Centene (CNC) today.

On Oct. 17, Market Rebellion’s proprietary programs flagged the purchase of 11,300 December $50 calls bought for $1.25 to $1.50 with shares at $46.75. This was clearly fresh buying, as volume was above the strike’s existing open interest of 9,321 contracts at that time.

Those calls traded for as much as $10.30 today, 7.5 times their average purchase price. The stock rose 28.43% in the same time period, a large move but nowhere near that of its options on a relative basis.

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.

CNC is up 3.46% to $49.55 in midday trading today. Shares are up sharply since the health-care company reported earnings on Oct. 22.