$TEVA calls quadruple overnight

Option traders who opened bullish positions in Teva Pharmaceutical only one session earlier were collecting exponential profits today.

Just yesterday, Investitute’s tracking systems found that 2,600 Weekly $16.50 calls expiring this afternoon were purchased for $0.18 to $0.32 with shares at $16.41. This was clearly fresh buying, as open interest in the strike was only 968 contracts before the activity appeared.

Those calls traded up to $0.93 today, nearly 4 times their average purchase price. The stock rose 6.15% at the same time, showing how quickly options can far outpace gains in their underlying shares. Investitute co-founder Pete Najarian cited the unusual activity in naming Teva as his final trade today on CNBC’s “Halftime Report.”

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 was up 5.34% to $17.37 today. BofA/Merrill Lynch upgraded the generic-drug maker by two notches to “buy” from “underperform” with a price target of $20 yesterday.