It took just one day for bullish option traders to turn exponential profits in NewLink Genetics.
Just yesterday, Investitute’s tracking systems detected the purchase of 2,000 September $10 calls for $0.70 to $1.70 with shares rising to $11.54. These were clearly new positions, as open interest in the strike was a mere 23 contracts before the activity appeared.
Today those calls traded up to $9.20, representing an average gain of more than 660 percent. The stock soared 62.8 percent at the same time, a huge move but still one that was far below that of its options on a relative basis.
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.
NLNK surged 29.93 percent to $17.67 today. The drug maker rallied after releasing updated data on its proposed treatment for melanoma, which drew bullish commentary from analysts.