$BHGE bulls triple their money

Baker Hughes has been gushing higher with the price of oil, yielding huge gains on upside option positions.

On April 12, Investitute’s tracking systems detected the purchase of 8,000 May $34 calls as part of a bullish roll for $0.65 with shares at $31.69. This was clearly a new position, as open interest in the strike was only 168 contracts before the activity appeared.

Those calls traded for $2.30 this afternoon, more than 3.5 times their purchase price. The stock rose 14.2% in the same time period, underscoring how options can far outperform their underlying shares. Investitute co-founder Pete Najarian cited the unusual activity at the time it was initiated and updated his winning 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.

BHGE was up 1.12% today to close at $36 even. The oilfield-services company has rallied along with the rest of the energy sector for the last month as the price of crude has reached multi-year highs.