$TSRO bulls post large profits

Option traders nearly doubled their money on upside positions in Tesaro today.

On Oct. 25, Investitute’s proprietary programs flagged the purchase of 3,250 January $45 calls in one print for $2.90 as part of a bullish spread with shares at $32.45. This is clearly a new position, as volume was above the strike’s previous open interest of 2,782 contracts.

Those calls traded for as much as $5.30 this afternoon, almost twice their purchase price. The stock rose 17.78% at the same time, underscoring how 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.

TSRO jumped 5.35% today to close at $36.83. The stock rocketed more than 30% on Friday after Bloomberg reported that the biopharmaceutical oncology company was exploring a possible sale. Then this morning, Cantor Fitzgerald said Tesaro could be sold at $89 to $97 per share.