Bulls score a big win in $TEVA

Option traders turned exponential gains today on upside option positions in Teva Pharmaceutical (TEVA).

On Oct. 2, Market Rebellion’s market scanners detected the purchase of 7,000 November $8 calls for $0.33 to $0.34 with shares at $6.85. This was clearly fresh buying, as open interest in the strike was a mere 829 contracts before the trades occurred.

Those calls traded for as much as $1.50 during today’s session, more than 4 times their initial purchase price. The stock gained 30.5% at the same time, a large move but nowhere near that of its options on a relative basis.

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.

TEVA spiked to a session high of $8.95 today before pulling back to close at $8.15, still up 8.67%. The generic drug maker announced a settlement with both Cuyhoga and Summit counties of Ohio today, resolving the counties’ previous claims and removing Teva from the Track 1 opioid litigation.