$JNJ bulls quadruple money in week

It took only five sessions for option traders to turn exponential gains in Johnson & Johnson.

Last Tuesday, Investitute’s tracking systems detected the purchase of 12,600 November $135 calls for $1.57 to $2.10 with shares at $133.82. This was clearly fresh buying, as volume was well above the strike’s open interest of 4,111 contracts before the trades occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Fast Money” program.

Those calls sold for $6.35 at today’s closing bell, more than 4 times their original purchase price. The stock rose 5.3 percent in the same time frame, underscoring how shares 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.

JNJ was up 3.43 percent to close at $140.79 today. The health-care giant received two analyst upgrades early last week, first from Wells Fargo to “outperform” from “market perform” and then from Jefferies to “buy” from “hold.” Respective price targets were raised to $149 from $140 and $157 from $145 at the firms.