Large gains for $DGX calls

Bullish option traders are making large gains today on upside option positions in Quest Diagnostics (DGX) ahead of earnings results.

On Jan. 10, Market Rebellion’s Unusual Activity Service found that 2,000 February $105 calls were bought for $3.40 to $3.60 with shares at $106.45. Volume was well above the strike’s open interest of 354 contracts, indicating that this was clearly fresh buying.

Those calls have traded for as much as $7.27 today, double their purchase prices. The stock rallied 4.65% at the same time, a huge move but nothing like 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.

DGX was last up 0.32% on the session, at $111.21. The clinical laboratory operator will report quarterly earnings before the market opens tomorrow.