Bulls triple their money in $XLV

Option traders have tripled their money in the SPDR Health Care Fund (XLV).

On Oct. 8, Market Rebellion’s activity scanners identified the purchase of 100,000 Weekly $91 calls, expiring on October 25, for $0.40 to $0.42 as part of a bullish spread with shares at $88.72. This was clearly fresh buying, as volume dwarfed the previous open interest of 373 contracts.

Those calls have traded for $1.48 this morning, more than 3.5 times their purchase prices. The stock rose 3.88% 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.

XLV is currently lower on the session by 0.14% at $91.98. The exchange-traded-fund, which tracks a basket of Health Care equities, has gained this week with help from earnings reports from its components, such as United Health (UNH).