Gilead calls yield gigantic returns

Bullish option traders are collecting exponential profits in Gilead just days after opening their positions.

On Tuesday, Investitute’s scanners showed that 4,900 Weekly $64.50 calls expiring tomorrow were purchased for $0.32 to $0.58 with shares at $64.45. This was clearly fresh buying, as open interest in the strike was only 1,179 contracts before the activity appeared.

Those calls traded up to $6.65 today, a gain of roughly 1,400 percent in two sessions. The stock was up 10.4 percent in the same period, a significant move but one that pales in comparison to that of the 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.

GILD rose 4.41 percent today to close at $70.48. The drug maker rallied along with other pharmaceutical companies this week amid speculation that pricing restrictions will not be as draconian as originally feared.