$GILD call buyers rack up profits

Gilead Sciences has rallied sharply in the last week, handing major gains to upside option traders.

On June 6, Investitute’s proprietary programs flagged the purchase of 11,000 August $75 calls for $1.40 with shares at $70.63. This was clearly fresh buying, as volume was well above the strike’s open interest of 2,956 contracts.

Those calls traded for as much as $4.32 this morning, 3 times their purchase price. The stock rose 9.64% in the same time frame, underscoring how options can far outperform their underlying shares.

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.

GILD was up 0.14% to close at $76.75 today. The drug company’s shares have gained as the pharmaceutical industry has rebounded in recent days.