Bulls turn quick profits in $CELG

It took less than three days for option traders to double their money in Celgene.

On Monday, Investitute’s proprietary programs showed that 1,900 Weekly $89 calls expiring this Friday were purchased for $0.87 to $1.25 with shares at $88.84. This was clearly fresh buying, as open interest in the strike was only 153 contracts before that session began. Investitute co-founders Jon and Pete Najarian explained their reasons for liking the name today on CNBC’s “Halftime Report.”

Those calls traded for $1.92 today, more than twice their original purchase price. The stock rose 1.8% 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.

CELG spiked to $90.51 early today before settling back to close at $88.31, up 0.05% on the session. This morning JPMorgan reinstated coverage of the biopharmaceutical giant with an “overweight” rating and a $110 price target after the company announced a $150 million deal with Prothena to collaborate on treatments for Alzheimer’s and other diseases.