$TEVA calls turn quick profits

It took less than one week of trading for option traders to double their money in Teva Pharmaceutical.

On Apr. 22, Investitute’s market scanners identified the purchase of 3,200 May $15 calls for $0.48 and $0.49 as part of a bullish spread, while the underlying shares were trading for $14.35. Investitute co-founder Jon Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $1.03 this afternoon, double their purchase prices. The stock rose 6.83% in the same time frame, showing how quickly options can far outperform 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 was up 1.39% to $15.36 today. The generic-drug maker moved higher today after Express Scripts (ESRX) recommended Teva’s Austedo as an alternative treatment for tardive dyskinesia.