$COG call prices jump sixfold

Bullish option traders racked up large profits in Cabot Oil & Gas today as the energy sector continued to outperform the broader market.

On Sept. 19, Investitute’s tracking systems detected the purchase of 6,600 October $24 calls for $0.20 and $0.25 with shares at $22.25. These were clearly new positions, as volume was far above the strike’s open interest of 2,750 contracts before that session began.

Those calls traded for $1.30 today, about 6 times their average purchase price. The stock rose 12.81% in the same time frame, underscoring how options can far outperform their underlying shares. Investitute co-founder Jon Najarian also cited buying in the November $27 calls on CNBC’s “Halftime Report” yesterday.

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.

COG climbed to $25.16 this morning before pulling back to close at $24.41, up 0.25% on the session. The company has rallied along with other energy producers as the price of crude oil has reached multi-year highs.