Bulls double their money in $XLU

Bullish traders utilized calls to turn sizable profits on upside positions in the SPDR Utilities Fund.

On Nov. 5, Investitute’s proprietary programs flagged the purchase of 20,000 March 55 calls, expiring tomorrow, for $1.36 and $1.37 with shares at $53.68. Volume was above the strike’s open interest of 1,498 contracts, showing that it was a new position.

Investitute co-founder Jon Najarian made note of some of the unusually bullish activity in the XLU that day on CNBC’s “Halftime Report.”

Those March 55 calls traded for $3.66 today, more than 2.5 times their purchase prices. The stock rose 9.33% 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.

XLU made a new all-time-high of $58.73 during the lunch hour before pulling back to close down one cent at $58.41 today. What began as a safe-haven trade amid the volatility in the markets has turned into a search for yield, as the benchmark 10-Year has remained below 3%.