Whiting Petroleum has been ripping higher since reporting strong quarterly numbers a week ago, and option traders are cashing in exponential gains.
On Oct. 23, Investitute’s market scanners found that 2,100 Weekly $5 calls expiring this Friday were purchased for $0.20 to $0.22 with shares at $4.85. These were clearly new positions, as open interest in the strike was only 146 contracts before the trades occurred.
Those calls sold for $1.53 this morning, more than 7 times their original purchase price. The stock rallied 34.8 percent in the same time frame, a large move but nowhere near that of its options.
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.
WLL jumped 4.99 percent today to close at $6.31. The oil and gas producer beat quarterly estimates last Wednesday afternoon and has continued climbing with the price of crude.