$TEVA bulls post quick profits

Option traders who opened upside positions in Teva Pharmaceutical just one session earlier are already racking up large gains.

On Aug. 17, Investitute’s tracking systems detected the purchase of 3,700 October $24 calls for $1.22 to $1.55 with shares at $24.02. This was clearly fresh buying, as volume was more than double the strike’s open interest of 1,704 contracts.

Those calls traded up to $2.49 this afternoon, twice their initial purchase price. The stock rose 6.54% at the same time, underscoring how quickly options can far outpace gains in their underlying shares.

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 jumped 5.9% to $25.65 today. The generic drug maker has rallied sharply since billionaire investor Warren Buffett disclosed last week that his firm Berkshire Hathaway had increased its holdings in Teva.