$ACAD call prices soar fourfold

Nimble option traders profited from a drop in Acadia Pharmaceuticals last month, and now they are seeing significant returns on bullish positions.

On Sept. 14, Investitute’s proprietary programs flagged the purchase of 5,000 December $14 calls for $2 as part of a bullish spread with shares at $13.63. Open interest in the strike was a mere 28 contracts before the trade occurred, showing that it was a new position.

Those calls traded up to $7.97 today, about 4 times their purchase price. The stock surged 56.05% in the same time frame, underscoring how options can far outperform their underlying shares. Investitute co-founder Jon Najarian cited heavy buying in the January $27 calls as well on CNBC’s “Halftime Report” at the end of last week.

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.

ACAD jumped 7.86% to $21.41 today. Shares spiked late last week after the Food and Drug Administration reaffirmed the benefits of Acadia’s anti-psychotic medication Nuplazid. Today’s updated call positions follow a winning bearish option trade in the name last month, when the biopharmaceutical company reported weak second-quarter revenues.