Call buyers quadruple their money in $BAX

Bullish option traders quadrupled their money today in Baxter International (BAX).

On Dec. 6, our Unusual Activity Service flagged the purchase of 2,500 January $85 calls at the same time for $1.17 to $1.20 with shares at $83.17. Volume was far above the strike’s previous open interest of 1,268 contracts, showing that this was a new position.

Those calls traded for as much as $5.00 this morning, more than 4 times their purchase price. The stock rallied 8.07% in the same time period, a large gain but well below that of its options.

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.

BAX closed at $89.37 today, up 4.04% on the session. The life sciences company’s price target was raised to $102 from $95 this morning at UBS, which maintained its Buy rating.