$MRK bulls score fast gains

Option traders have already doubled their money on upside positions in Merck opened at the beginning of this week.

On Feb. 11, Investitute’s market scanners lit up with the purchase of 18,415 June $82.50 calls in one print for $1 with shares at $77.30. Open interest in the strike was only 1,483 contracts before the trade occurred, showing that this was a new position. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $1.98 today, about twice their purchase price. The stock rose 3.66% 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 up 1.1% to $79.81 today. The pharmaceutical giant beat earnings and revenue estimates on Feb. 1.