$INCY call buyers post large profits

Option traders are posting large profits today on bullish positions opened in Incyte (INCY).

On Nov. 13, Market Rebellion’s Unusual Option Activity Service detected the purchase of 1,200 December $95 calls for $0.70 to $1.05 with shares at $86.63. This was clearly fresh buying, as open interest in the strike was just 235 contracts before that session began.

Market Rebellion co-founder Jon Najarian noted the activity at the time in the live Unusual Option Activity forum.

Those calls have changed hands for as much as $2.90 this afternoon, more than 4 times their initial purchase price. The stock rose 11.47% at the same time, underscoring how quickly options can far outpace gains in 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.

INCY is currently up by 1.89% at its session high of $96.58, itself a new 52-Week high for the stock. The pharmaceutical company has risen sharply since reporting earnings on Oct. 29 where it beat expectations and raised guidance.