Oil bulls hit gusher in $OXY

Option traders have tripled their money on upside positions in Occidental Petroleum (OXY).

On Aug. 26, Market Rebellion’s scanners identified the purchase of 3,000 September $44 calls were bought for $0.58 to $0.70 with shares at $42.50. This was clearly a new position, as open interest in the strike was only 374 contracts before the trade occurred.

Those calls sold for $2.15 today, more than 3 times their purchase prices. The stock rose 8.4% in the same time period, underscoring how options can far outperform their underlying shares.

Market Rebellion co-founder Jon Najarian also cited unusual activity in October $47.50 calls on CNBC’s “Halftime Report” Sept. 6. Those calls have nearly doubled in price.

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.

$OXY is up 0.73% to $45.73 this afternoon. The oil and gas producer has rallied along with other energy names as the price of crude has rebounded.