$CYH call prices spike overnight

Option traders doubled their money today on bullish positions opened in Community Health Systems only 24 hours earlier.

Just yesterday, Investitue’s market scanners identified the purchase of 5,800 September $5 calls for $0.40 and $0.45 with shares at $3.92. This was clearly fresh buying, as open interest in the strike was only 287 contracts before the activity appeared.

Those calls traded for $0.85 this morning, twice their purchase prices. The stock rallied 28.3% at the same time, a large move but still nowhere near that of its options.

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.

CYH spiked higher by 28.09% to $5.09 today. The hospital operator posted a surprise profit and topped revenue estimates after the market closed yesterday.