$BHC calls quadruple in hours

Option traders who opened bullish positions in Bausch Health this morning were reaping exponential profits by early afternoon.

Less than 15 minutes after the opening bell, Investitute’s market scanners found that 4,700 Weekly $26 calls expiring on March 22 were purchased for $0.13 to $0.18 with shares at $25.29. This was clearly fresh buying, as open interest in the strike was only 586 contracts before the activity appeared.

Those calls traded up to $0.60 just before the close, about 4 times their average purchase price. The stock rose 3.91% at the same time, 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 jumped 7.13% to $26.29 today. Mizuho raised its price target on the name to $41 from $39 yesterday, saying its 2019-2022 outlook is “within reach.”