$CI call prices jump threefold

Bullish option traders cashed in big gains on Cigna today.

On June 28, Investitute’s tracking systems detected the purchase of 4,000 October $175 calls bought for $6.60 as part of a bullish spread with shares at $167.88. This was clearly a new position, as open interest in the strike was a mere 309 contracts before the trade occurred.

Those calls sold for $21.15 this morning, more than 3 times their purchase price. The stock rose 16.65% in the same time period, illustrating the kind of leverage that can be achieved with options.

Invesitute co-found Pete Najarian also cited heavy buying today in the January $220 calls on CNBC’s “Halftime Report” this afternoon, about two hours before CI shares spiked higher on news that the Justice Department has approved Cigna’s $54 billion acquisition of pharmacy-benefits manager Express Scripts.

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.

CI was up 1.4% to $197.84 at today’s close after reaching $201.69 earlier in the session. The health-services company broke out of its recent range last week and is trading at its highest level in more than six months.