Energy bulls score in $XOP

Option traders have nearly tripled their money on upside positions in the SPDR S&P Oil & Gas Exploration & Production Fund.

On March 18, Investitute’s tracking systems showed that 4,500 Weekly $32 calls expiring on April 12 were bought in one print for $0.23 with shares at $30.12. This was clearly a new position, as open interest in the strike was a mere 90 contracts before the trade occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls sold for $0.66 today, nearly 3 times their purchase price. The stock rose 7.47% in the same time period, underscoring how options can far outperform their underlying shares on a relative basis.

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.

XOP was up 0.69% to $32.03 today. The exchange-traded fund has rallied as crude oil has jumped to five-month highs.