$ARQL bulls score winners

Bulls who opened upside option positions in ArQule (ARQL) at the end of last week are seeing their bets pay off today.

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two consecutive sessions at the end of last week:

–On Dec. 5, 4,800 December $11 calls were purchased for $1.30 to $1.45 above open interest of 812 contracts with shares at $9.80.
–On Dec. 6, 5,000 December $15 calls were bought for $0.57 to $0.58, as part of a bullish spread, above open interest of 330 contracts with shares at $9.74.

Those December 11 calls have traded for as much as $8.70 this morning, while the December 15 calls have traded up to $4.70, both more than 6 and 8 times their respective purchase prices. The stock rose as much as 101.54% in that same time period, a significant move but nowhere near that of its options.

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.

ARQL is up 103.62% to $19.68 in morning trading. The cancer drug developer this morning announced that it will be acquired by Merck (MRK) for $20 per share.