$CVS bulls triple their money

Multiple option trades in CVS Health have scored big returns.

On Aug. 14, Investitute’s market scanners identified the purchase of 5,000 October $75 calls for $1.55 as part of a bullish spread with shares at $71.71. This was clearly a new position, as open interest in the strike was only 937 contracts before the trade occurred. Investitute co-founder Pete Najarian cited that unusual activity and subsequent volume in the same strike during CNBC’s “Halftime Report” on Aug. 22.

Those calls traded for $5.40 today, about 3.5 times their purchase price. The stock rose 11.2% in the same time period, underscoring how options can far outperform their underlying shares.

Najarian said he closed his position on CNBC today to take profits. It was the second winning CVS trade posted on Investitute in the last 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.

CVS was up 0.54% to close at $79.39 this afternoon. At a town-hall meeting in Los Angeles today, the pharmacy chain’s CEO outlined the potential of his company’s proposed mega-merger with Aetna.