Traders posted exponential gains today on upside positions opened in Valeant Pharmaceuticals just a few days ago.
On Monday, Investitute’s proprietary programs found that 9,300 Weekly $15.50 calls expiring today were purchased for $0.07 to $0.33 with shares at $15.66. This was clearly fresh buying, as volume was far above the strike’s 2,881 contracts.
Those calls traded for as much as $1.26 today, 18 times their original purchase price. The stock rose less than 5.8 percent at the same time, showing how quickly options can far outperform gains in their underlying shares. It was the second winning trade in Valeant this month.
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.
VRX was up 0.18 percent today to close at $16.57. The drug and medical-device company spiked higher on strong quarterly results earlier this month.