Call buyers quintuple their money in $BAX

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

On Aug. 30, Market Rebellion’s Unusual Activity programs detected the purchase 2,500 Weekly $76 calls, expiring next Friday, Sep. 10, for $1.10 to $1.20 with shares at $76.48. The volume was well above the contract’s previous open interest of 28 which indicated that this was a new position.

Those calls traded for as much as $6.16 this morning, more than 5 times their purchase price. The stock rallied 7.52% 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 was last at $80.79, up 4.49% on the session. The life sciences company is to buy the medical-equipment maker Hill-Rom Holdings, Inc. (HRC) for $156.00 per share in an all-cash transaction.