Bulls hit a gusher in $XOP

Option traders have hit quite the gusher, more than quintupling their money on upside positions in the SPDR S&P Oil & Gas Exploration & Production Fund (XOP).

On Dec. 9, our Unusual Activity Service detected the purchase of 30,000 Weekly $22.50 calls expiring this Friday, Dec. 27, for $0.13 to $0.19 with shares at $21.11. This was clearly fresh buying, as open interest in the strike was a mere 62 contracts before that session began

Those calls have traded for as much as $1.03 today, at least 5 times their purchase prices. The stock rose 11.32% in the same time period, underscoring how options can far outperform their underlying shares 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.

XOP is currently up 1.16% at $23.49. The exchange-traded fund has rallied off its lows from earlier this month as the price of crude topped the $60 per barrel mark for the first time since September.