$GSK call prices spike

GSK plc (GSK) option traders that opened upside positions two sessions ago and are seeing a spike today.

On Oct. 7, Market Rebellion’s Unusual Option Activity Service found that 4,000 Weekly $39 calls, expiring Oct. 11, were bought for $0.44 to $0.50 with shares at $38.86. This was clearly fresh buying, as open interest in the contract was just 24 before the activity appeared.

Those calls have traded for as much as $3.02 this session, a 504% return, while the stock gained 7.33% at the same time, a large move but nowhere near that of its options on a relative basis.

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.

GSK was last higher on the day by 7.76% at $40.97.