Calls surge fourfold in $CAH

Option traders who opened bullish positions in Cardinal Health at the end of last year are reaping huge returns today.

On Dec. 28, Investitute’s tracking systems detected the purchase of 10,000 February $45 calls bought in one print for $2.20 with shares at $44.19. This was clearly a new position, as open interest in the strike was a mere 23 contracts before that session began. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for as much as $9.80 today, about 4.5 times their purchase price. The stock rose 23.49% in the same time period, showing how options can far outperform 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.

CAH jumped 6.81% to $54.25 today. The health-care company surpassed quarterly expectations and raised its outlook before the market opened this morning.