$ECYT bulls triple their money

Option traders collected exponential profits in Endocyte today on news that the company will be acquired.

On Sept. 11, Investitute’s market scanners identified the purchase of 1,400 October $19 calls for $1.45 to $1.55 with shares at $18.79. This was clearly fresh buying, as open interest in the strike was a mere 85 contracts before the trades occurred.

Those calls sold for $4.50 this morning, 3 times their average purchase price. The stock surged 25.23% in the same time period, a large move but 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.

ECYT spiked higher by 50.39% to $23.40 today. Shares rocketed this morning after Swiss drug giant Novartis announced that it was buying the biopharmaceutical firm for $2.1 billion.