Huge profits from Valeant calls

Traders have reaped fast and large returns in Valeant Pharmaceuticals.

On Monday, Investitute’s proprietary systems showed that 10,100 Weekly $11 calls expiring this Friday were purchased for $0.26 to $0.31 with shares at $9.86. Volume was well above the strike’s previous  open interest of 3,557 contracts, indicating that this was fresh buying.

Today those calls traded up to $1.99, a gain of roughly 600 percent just two sessions later. The stock was up 31 percent in that same time, but that paled in comparison to the stratospheric move in 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.

VRX was up 5.14 percent today to close at $12.68. The drug company missed revenue estimates yesterday morning but reduced debt and raised its outlook.

For more information on Unusual Option Activity, visit this page.