$MRK call buyers get a dose of gains

$MRK call buyers get a dose of gains


Option traders are getting a dose of gains today on upside positions in Merck (MRK).

On Nov. 29Market Rebellion’s Unusual Option Activity Service found that 12,400 April $110 calls were bought for $1.70 to $1.82 with shares at $100.81. This was clearly fresh buying, as open interest in the contract was just 9,907 before the activity appeared.

Those calls traded for as much as $8.82 today, a 384.62% return, while the stock rose 14.46% in the same time period, underscoring how options can far outperform 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.

MRK was last up 1.75% to $115.22 in midday trade.

Ready to start trading? Try Unusual Option Activity Essential. Learn how you can follow the “smart money” with a fresh UOA trade idea each week – including technical levels so that you know how to manage each trade!

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