How $NKTR calls rocketed sixfold

Option traders pocketed enormous profits today on bullish positions in Nektar Therapeutics.

On Nov. 16, Investitute co-founder Jon Najarian cited the purchase of $2,000 January $50 calls for $2.95 to $3.10 with shares at $44.96. This was clearly fresh buying, as open interest in the strike was a mere 50 contracts before the trades occurred.

Those calls sold for $18.10 just before today’s closing bell, more than 6 times their origial purchase price. The stock surged 52 percent in the same time period, a huge move but one that was still far below 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.

NKTR surged 18.52 percent to $68.03 today. The pharmaceutical company spiked higher this afternoon after its CEO made positive comments on its pipeline at the annual J.P. Morgan Healthcare Conference.