Why $JUNO calls rocketed 8-fold

Juno Therapeutics soared on merger speculation today, handing exponential gains to option traders.

On Dec. 20, Investitute’s proprietary systems cited the purchase of 2,050 February $52.50 calls for $2.25 to $2.40 with shares at $45.72. These were clearly new positions, as open interest in the strike was only 186 contracts before the activity appeared.

Those calls traded for $18.06 today, 8 times their original purchase price. The stock surged 52.6 percent in the same time period, a huge move but nowhere near that of its options on a relative basis.

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.

JUNO spiked higher by 51.86 percent today to close at $69.25. The biopharmaceutical company rallied sharply last night on reports that Celgene may offer to buy the firm for $11 billion.


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