Option bulls score in $TEVA

Option traders are turning big gains on upside option positions that expire today in Teva Pharmaceutical (TEVA).

On Jun. 7, Market Rebellion’s Unusual Activity Service identified the purchase of 6,900 Weekly $11 calls, expiring today, for $0.05 to $0.17 with shares at $10.49. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 2,350 contracts.

Those calls traded for as much as $0.48 during today’s session, more than 2.5 times their initial purchase price. The stock gained 30.5% at the same time, a large move but nowhere near 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.

TEVA was last lower on the day by 2.39% at $11.26.