Bulls triple their money in $XLE

The SPDR Energy Fund has been ramping higher recently, handing large profits to upside option positions.

On Sep. 14, Investitute’s market scanners identified the purchase of 10,000 October $76 calls for $0.56 to $0.58 with shares at $74.05. This was clearly a new position, as volume was well above the strike’s open interest of 6,588 contracts. Investitute’s co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $1.88 this morning, more than 3 times their purchase prices. The stock rose 3.97% in the same time frame, showing how options can far outperform their underlying shares.

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.

XLE was up 0.64% to $76.69 today. The exchange-traded fund has risen sharply with the price of crude in recent weeks.