Bulls double their money in $CI

Option traders who opened upside positions in Cigna last week are already seeing significant returns.

On Sept. 17, Investitute’s market scanners identified the purchase of 14,000 January $220 calls for $2.58 to $2.90 with shares at $196.84. These were clearly new positions, as open interest in the strike was only 402 contracts before the activity appeared. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $5.25 just before today’s closing bell, twice their initial purchase price. The stock rose 4.91% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

CI rose 1.94% to close at $206.35 this afternoon. The January calls cited today were purchased after Cowen initiated the health-services name with an “outperform” rating and a $240 price target.