$JNJ call prices spike 6-fold

Bullish option traders are racking up huge profits in Johnson & Johnson (JNJ) today.

On Oct. 18, Market Rebellion’s Unusual Activity Service flagged the purchase of 7,500 December $135 calls for $1.32 as part of a bullish roll with shares at $128.16. Open interest in the strike was only 1,031 contracts before the trade occurred, showing that this was a new position.

Those calls have traded for as much as $8.36 so far today, more than 6 times their purchase price. The stock rose 11.76% in the same time period, 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.

JNJ is up 0.78% to $142.90 this morning. Morgan Stanley upgraded the health-care giant to “overweight” from “equal weight” this morning with a price target of $170.