$AERI pays off again for call buyers

Aeri Pharmaceuticals soared with positive clinical data today, handing bullish traders their second big win in recent days.

On Oct. 5, Investitute’s tracking systems detected the purchase of 2,000 November $55 calls for $6.10 to $7.10 with shares at $53.80. These were clearly new positions, as open interest in the strike was just 314 contracts before the activity appeared.

Those calls traded for $13.10 this morning, more than double their original purchase price. The stock rose 19.2 percent in the same time frame, illustrating the kind of leverage that can be achieved through options.

It was the second winning call trade in Aeri posted on Investitute in barely a week. Investitute co-founder Jon Najarian chose the name for his final trade Oct. 3 on CNBC’s “Halftime Report,” citing the purchase of the November $60 calls for $3.21 at that time. Those contracts traded up to $8.30 today.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

AERI surged 16.17 percent today to close at $64.30. The stock spiked higher after the Food and Drug Administration found that the company’s glaucoma drug effectively reduced eye pressure in preliminary findings.