Energy companies surged today as oil hit its highest levels since May, allowing Oasis Petroleum to yield huge returns on upside option positions.
On Aug. 28, Investitute’s market scanners identified the purchase of 2,100 October $9 calls for $0.12 to $0.15 with shares at $6.95. These were clearly new positions, as open interest in the strike was only 110 contracts before the trades occurred.
Those calls rose to $0.48 today, four times their original price. The stock jumped 24 percent in the same time frame, a large move but one that still pales in comparison to that of its 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.
OAS rose 1.35 percent to close at $8.27. The oil and natural-gas producer rallied as high as $8.64 in the morning but pulled back with the rest of the sector when crude prices failed to stay above the key $50 level.