Call prices soar 4-fold in $LLY

Bullish option traders are scoring huge profits today in Eli Lilly (LLY).

On Dec. 18, Market Rebellion’s Unusual Activity Service identified the purchase of 2,000 February $135 calls for $1.94 as part of a bullish roll with shares at $128.39. Open interest in the strike was a mere 111 contracts before the trade occurred, showing that this was a new position.

Those calls have traded for as much as $8.31 so far today, more than 4 times their purchase price. The stock rose 11.59% in the same time frame, underscoring how quickly options can far outperform their underlying shares.

It is the second winning trade in the name to be posted on Market Rebellion over the past month.

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.

LLY opened sharply lower at $141.12 this morning but has sharply recovered, last down 0.89% at $145.10, following an announcement that its Alzheimer’s drug failed to meet the primary endpoint in a study.