$PFE bulls win big before earnings

Option traders turned are posting huge gains in Pfizer ahead of quarterly results early next week.

Just Thursday, Investitute’s market scanners identified the purchase of 4,800 February $37.50 calls for $0.36 to $0.38 with shares at $37.20. These were clearly new positions, as open interest in the strike was only 424 contracts before the activity appeared.

Those calls traded for $1.70 at the end of yesterday’s session, 4.5 times their purchase prices. The stock rose 5% at the same time, showing how quickly options can far outpace gains in their underlying shares.

Long calls lock in the price where a 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.

PFE jumped 4.78% to $39.01 yesterday. The company is scheduled to announce fourth-quarter earnings and revenue before the market opens on Tuesday.