It took just 24 hours for option traders to reap enormous profits in Gilead Sciences.
Just yesterday, Investitute’s tracking systems found that 2,700 Weekly $75 calls expiring this Friday were purchased for $0.42 to $0.72 with shares at $74.52. This represented fresh buying, as volume was well above the strike’s open interest.
Those calls traded for $3.75 today, 9 times their original purchase price. The stock rose 5.5 percent at the same time, showing how quickly options can far outpace gains in their underlying shares. Investitute co-founder Pete Najarian cited even more unusual activity in Gilead on CNBC’s “Halftime Report” this afternoon.
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.
GILD jumped 4.97 to $78.10 today. The drug maker rallied after its CEO outlined the company’s plans for growth at the annual J.P. Morgan Healthcare Conference this afternoon.