$BHC call buyers see big gains

Bullish call buyers are seeing big gains in Bausch Health (BHC) today.

Back on May. 7, Market Rebellion’s Unusual Activity Scanners identified the purchase of 6,000 January $15 calls for $3.55 to $3.70 with shares at $15.74. This was clearly fresh buying, as volume was well above the strike’s previous open interest of just 2,255 contracts.

Those calls traded for $7.85 today, more than double their purchase prices. The stock rose 40.41% in the same time frame, showing how quickly options can far outpace gains in 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.

BHC was up 3.5% to $20.13 at the close today after trading as high as $22.97 earlier in the session. The pharmaceutical company reported earnings before the opening bell this morning, disclosing that it plans to spin off its eye health unit.