Celgene calls turn 1,000% profit

Bullish traders have been snapping up a wave of short-term options in recent days, and those positions are already paying astronomic returns.

On June 8, Investitute’s market scanners showed that 2,100 Weekly $118 calls expiring this Friday were purchased for $1.13 to $1.27 with shares at $116.70. These were new positions, as open interest in the strike was only 293 contracts before the activity appeared.

Those calls traded for $12.55 this morning and were marked even higher by the end of the session, at $14.83–a gain of more than 1,000 percent in less than two weeks. The stock rose about 13.8 percent in the same time frame, underscoring how options can far outperform their underlying shares. Celgene also saw heavy call buying yesterday and today in several other strikes that expire this week, as posted on our proprietary Unusual Option Activity Log seen here.

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.

CELG jumped 5.24 percent today to close at $132.83 after hitting a 52-week high of $133.71 a few minutes before the bell. Pharmaceutical companies rallied amid reports that federal proposals to limit prices on drugs may not be as onerous as previously believed.