$CDEV call buyers hit gusher

It took less than a week for bullish option traders to triple their money in Centennial Resource Development.

On Sept. 10, Investitute’s proprietary programs cited the purchase of 2,500 January $20 calls for $0.80 to $0.85 as part of a bullish spread with shares at $19.61. This was clearly a new position, as volume was well above the strike’s open interest before that session began.

Those calls traded up to $2.45 today, 3 times their purchase prices. The stock rose 7.04% 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.

CDEV was up 0.14% to $21.05 today. Analysts have become increasingly bullish on the oil and natural-gas producer, most recently Suntrust Robinson upgrading the name to a “buy” from “hold” and raising its price target to $25 from $20.