Bulls score big with $AZN lab results

Good news in AstraZeneca drug trials is translating to substantial gains for upside option traders.

On Aug. 31, Investitute’s proprietary programs identified the purchase of 3,900 September $29.50 calls for $0.55 to $0.68 with shares at $29.84. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,081 contracts.

Those calls sold for $2.85 today, for an average profit of more than 360 percent. The stock rose 8.2 percent in the same time frame, underscoring the kind of leverage that can be obtained with options.

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.

AZN was up 1.13 percent today to close at $32.25. The pharmaceutical company said clinical tests showed improving survival rates among patients who have taken its lung-cancer drug.