$JNJ pays off big again for call buyers

Johnson & Johnson keeps climbing to new highs, and bullish traders are raking in profits along the way.

Just last Friday, Investitute’s tracking systems found that 2,600 Weekly $144 calls expiring on Oct. 27 were purchased for $0.31 to $0.72 with shares at $143.08. These were clearly new positions, as open interest in the strike was only 259 contracts before the trade occurred.

Those calls sold for $1.10 this morning, more than triple their original purchase price. The stock was up less than 0.9 percent at the same time, illustrating the kind of leverage that can be achieved through options. It was the second winning call trade in Johnson & Johnson posted on Investitute in less than a week.

Long calls lock in the price where a 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.

JNJ rose 0.86 percent today to close at $143.62 after reaching a new 52-week high of $144.35 earlier in the session. The health-care giant broke out of a months-long range at the beginning of last week and received upgrades from several research firms.