$INCY calls turn large profit overnight

It took just one day for bullish options to draw significant returns from Incyte.

Just yesterday, Investitute’s market scanners identified the purchase of 2,500 December $150 calls for $4.60 with shares at $125.37. This was clearly a new position, as open interest in the strike was only 109 contracts before the activity appeared.

Today those calls traded up to $8.30, nearly doubling in 24 hours. The stock was up 10.1 percent at the same time, showing how quickly options can far outpace gains in their underlying shares.

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.

INCY jumped 10.64 percent to $138.27 today. The stock rallied on news that the drug company and Eli Lilly will resubmit their rheumatoid arthritis treatment baricitinib for approval by the Food and Drug Administration.