$MRK bulls score at highs

Option traders are scoring exponential gains today on upside positions in Merck (MRK) opened this week.

On Sep. 29, Market Rebellion’s Unusual Activity Service found that 3,700 Weekly $80 calls, expiring next Friday, were bought for $0.05 to $0.12 above the existing open interest of 107 contracts with shares at $74.61.

Those calls traded for $5.18 so far this morning, over 43 times their purchase prices. The stock rose 12.88% in the same time frame, underscoring how quickly options can dwarf gains in their underlying shares 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.

MRK was last up 7.93% to $81.07 today. The pharmaceutical giant reported positive results from its Phase 3 MOVe-OUT trial this morning.