How $ABBV calls soared tenfold

AbbVie has rallied sharply in recent months, and option traders cashed in big on bullish positions today.

On Sept. 21, Investitute’s market scanners identified the purchase of 6,900 October $91 calls for $0.46 to $0.53 with shares at $87.08. These were clearly new positions, as open interest in the strike was a mere 13 contracts before the trades occurred.

Those calls sold for $5 seconds before today’s closing bell, more than 10 times their original purchase price. The stock rose 10.2 percent in the same time period, underscoring how options can far outperform 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.

ABBV hit a 52-week high of $98.26 early this morning but closed the day off 0.39 percent to $96.10. Shares have been climbing since late September, when a settlement with rival Amgen allowed AbbVie to develop a drug to compete with best-selling Humira by 2024.