Why $MNKD calls are skyrocketing

MannKind announced positive regulatory changes for a key product this week, and that has translated to huge gains for upside option positions.

Just last Friday, Investitute’s proprietary programs showed that 5,500 Weekly $2 calls that expire on Oct. 6 were purchased for $0.07 to $0.10 with shares at $1.85. These were clearly new positions, as open interest in the strike was only 611 contracts before the activity appeared.

Those calls traded up to $0.98 today, 14 times their original purchase price. The stock soared 58.8 percent in the same time frame, a huge move but one that was still far below that of the 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.

MNKD surged 20.51 percent today to close at $2.82. MannKind said yesterday that the Food and Drug Administration has approved an important label change for Afrezza, the biotech firm’s inhaled-insulin product.