Bulls double money in $UNH

UnitedHealth (UNH) reported strong quarterly results this morning, yielding large profits on upside option positions opened only one week ago.

On Oct. 8, Market Rebellion’s activity scanners identified the purchase of 2,600 December $240 calls for $3.50 to $3.70 with shares at $219.60. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 1,602 contracts.

Those calls have traded for as much as $9.40 so far today, more than 2.5 times their purchase prices. The stock rose 9.02% in the same time frame, showing how quickly options can far outperform 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.

UNH is up 7.91% to $238.03 near midday trading. The health insurer topped earnings and revenue expectations before the market opened today.