$MYL calls pay off big in hours

Option traders who opened bullish positions in Mylan this morning were reaping significant profits by lunchtime.

About half an hour after the opening bell, Investitute’s market scanners identified the purchase of 3,300 March $28 calls for $0.09 to $0.16 with shares at $27.62. This was clearly fresh buying, volume was far above the strike’s previous open interest of 1,244 contracts.

Those calls traded up to $0.71 less than three hours later, more than 5 times their average purchase price. The stock rose 3.08% 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.

MYL was up 1.93% to $28 today. The drug maker fell sharply after reporting earnings on Feb. 26 but has been rebounding this week.