A management change did wonders for bullish option positions in Alexion Pharmaceuticals today.
On May 30, Investitute’s market scanners showed that 3,300 June $100 calls were purchased for $2.95 to $3 with shares at $97.81. These were clearly new positions, as open interest in the strike was only 877 contracts before the session began.
Today those calls trade as high as $16.80, representing a profit of more than 460 percent. The stock rose less than 19.5 percent in the same 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.
ALXN jumped 9.26 to close today at $118. The drug company spiked higher after announcing the hiring of a former Biogen chief financial officer Paul Clancy as its own CFO.