Vertex bulls get huge dose of profits

Upside option positions in Vertex Pharmaceuticals have seen exponential returns.

On May 2, Investitute’s proprietary programs found that 7,200 July $10 calls were purchased for $1.30 to $1.72 with shares at $10.26. This represented new positioning, as volume was well above the strike’s open interest of 4,524 contracts.

Those calls traded for $7.70 today, an average gain of more than 400 percent. The stock surged 72.8 percent in the same period, a huge advance but still far less than that of the options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

VRX was up 2.03 percent to $17.60 today. The drug company has rallied in recent months after raising guidance and announcing the addition of billionaire hedge-fund manager John Paulson to its board.