Call buyers hit gusher in $COG

Bullish option traders tripled their money in Cabot Oil & Gas today.

On Dec. 28, Investitute’s proprietary programs identified the purchase of 19,500 January $24 calls for $0.60 as part of a bullish roll with shares at $22.76. This was clearly a new position, as volume was well above the strike’s open interest of 16,531 contracts before the trade occurred.

Those calls sold for as much as $1.80 before expiring this afternoon, 3 times their purchase price. The stock rose 13.49% in the same time period, 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.

COG has rebounded with the price of crude this year, closing today up 1.43% to $25.62. Jefferies upgraded the oil and gas producer to “buy” from “hold” and raised its price target to $29 from $25 on Jan. 7.