$HRC option bulls score

Prescient bullish option trades are being rewarded today with big profits on upside positions in Hill-Rom Holdings, Inc. (HRC) as it sets a record high.

On Aug. 13, Market Rebellion’s Unusual Activity Service found that 4,000 September $135 calls were bought for $4.67 as part of a bullish spread above the existing open interest of 305 with shares at $133.78.

Those calls traded for as much as $13.50 during this session, nearly triple their purchase prices. The stock rose 9.58% in the same time frame, showing how options can far outperform their underlying shares 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.

HRC was last at $146.23, up 10.03% on the session in afternoon trade, rising after news that Baxter International (BAX) is in advanced talks to buy the medical-equipment maker.