Bulls flying high with Kite Pharma

Option traders opened upside positions in Kite Pharma three months ago, and they have proven well worth the wait.

Way back on April 20, 3,100 July 100 calls bought for 1.47 to 2.05 against open interest of 304 contracts. Stock 80.02

Today those calls sold for as much as $10, an average gain of more than 450 percent. The stock surged 37.6 percent in the same time frame, an impressive gain but one that was still far below that of the options on a relative basis.

Long calls lock in the price where the 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.

KITE jumped 4.23 percent to $109.89 today. The biopharmaceutical company began rallying sharply in early June after announcing positive data on cancer treatments and receiving encouraging responses from the Food and Drug Administration.