Option bulls stake their gains in $BHC

Bullish call buyers are seeing big gains in Bausch Health (BHC) today.

Back on Feb. 5, Market Rebellion’s Unusual Activity Scanners identified the purchase of 4,500 Weekly $28.50 calls for $0.36 to $0.48 with shares at $28.10. This was clearly fresh buying, as volume was well above the strike’s previous open interest of just 57 contracts.

Those calls have traded for $2.60 this morning, more than 5 times their purchase prices. The stock rose 14.09% in the same time frame, showing 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.

BHC was last up 4.68% to $31.52 in early trade. Carl Icahn reportedly took an activist stake in the pharmaceutical company, announced after the close yesterday.