$APC bulls double their money

It took only a few sessions for short-term option traders to collect large profits in Anadarko Petroleum.

On Feb. 11, Investitute’s proprietary programs flagged the purchase of 2,100 February $40 calls for $2.10 to $2.78 with shares at $42.63. This was clearly fresh buying, as volume was far above the strike’s open interest of 386 contracts before the trades occurred.

Those calls sold for as much as $4.25 today, more than double their initial purchase price. The stock rose 3.8% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

APC was up 2.9% to $44.04 today. JP Morgan cut its price target for the oil and gas producer to $65 from $67 yesterday morning but said the company’s problems are “finally in the rear-view mirror.”