$TEVA bulls quintuple their money

Option traders have turned exponential profits in Teva Pharmaceutical.

On Oct. 20, Investitue’s proprietary programs found that 20,000 January $15 calls were purchased mostly in one print of 18,034 for $1.39 with shares at $14.90. Volume was far above the strike’s open interest of 7,555 contracts, showing that this was fresh buying.

Those calls traded for $7.11 today, more than 5 times their purchase price. The stock rose 48.4 percent in the same time period, a huge move but 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.

TEVA spiked to $22.25 this morning but pulled back with the rest of the market to close at $21.41, down 2.99% on the session. The drug maker is up sharply since announcing a massive restructuring program that included 14,000 layoffs a month ago.