Call buyers rack up gains in $NBR

Option traders quadrupled their money in Nabors Industries today.

On May 10, Investitute’s trading systems detected the purchase of 5,400 May $7.50 calls bought for $0.34 to $0.41 with shares at $7.73. This was clearly fresh buying, as volume was well above the strike’s open interest of 1,493 contracts.

Those calls traded for $1.30 today, nearly 4 times their initial purchase price. The stock rose 14.4% at the same time, showing how options can quickly outpace gains in 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.

NBR was up 2.62% to $8.61 today. The offshore oil and natural-gas driller has rallied along with other energy names as the price of crude has surged to multi-year highs.