$IBB call buyers post healthy gains

The iShares Nasdaq Biotechnology Index Fund (IBB) is trading sharply higher this session after positive approval news for one of its top holdings, Biogen (BIIB).

On May 26, Market Rebellion’s Unusual Activity Service found that 9,300 June $155 calls were bought for $1.17 to $1.50 above open interest of just 2,747 contracts with shares at $150.17.

Those calls traded for as much as $7.10 today, over 4.5 times their purchase prices. The stock gained 7.36% at the same time, a huge move but still nowhere near that of its options on a relative basis.

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.

IBB was last up on the day by 4.13% at $159.34. Biogen (BIIB), one of the funds top holdings, received approval from the FDA for its Aduhelm for Alzheimer’s disease today.