Calls triple overnight in $GILD

Option traders who opened bullish positions in Gilead Sciences yesterday afternoon were posting large gains by this morning on positive clinical-trial news.

Just yesterday, Investitute’s proprietary programs identified the purchase of 2,400 September $73.50 calls for $0.48 to $0.50 with shares at $72.21. These were clearly new positions, as open interest in the strike was only 320 contracts before the activity appeared.

Those calls sold for as much as $1.73 this morning, more than tripling in value overnight. The stock 3.82% at the same time, illustrating the kind of leverage that can be achieved quickly with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

GILD was up 2.41% to $73.97 today. The pharmaceutical giant and Galapagos NV jointly announced last night that their proposed treatment for rheumatoid arthritis had achieved its primary goals in a Phase III study.

(Disclosure: I am long GILD.)