$HZNP bulls triple their money

Traders cashed in large profits on upside options that expired this afternoon in Horizon Pharma.

On Nov. 6, Investitute’s proprietary programs flagged the purchase of 2,000 November $20 calls for $0.60 to $0.70 with shares at $19.39. This was clearly a new position, as open interest in the strike was only 481 contracts before the activity appeared.

Those calls sold for $1.70 today, nearly 3 times their initial purchase price. The stock rose 11.66% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

HZNP was up 2.87% today to close at $21.86. The Dublin-based drug maker, which has been the subject of takeover speculation, rallied after quarterly results on Nov. 7. In addition, Stifel raised its price target on the name to $35 from $25 on Nov. 1.