Bulls draw huge gains in Tesoro

Tesoro is paying exponential returns on upside option positions.

On May 16, Investitute’s tracking systems detected the purchase of 2,100 June $95 calls for $0.07 to $0.11 with shares at $81.62. Open interest in the strike was only 55 contracts before the trades occurred, showing that they were new positions.

Those calls traded for $0.58 just before the closing bell today, a gain of more than 500 percent. The stock rose about 15.4 percent in the same time frame, underscoring the kind of leverage that can be obtained through options.

Long calls lock in the price where the 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.

TSO was up 3.32 percent today to finish the session at $94.22. The oil refiner, which has been rallying for more than a week, got another boost this morning after Goldman Sachs reinstated the name with a “Conviction Buy” rating and a $121 price target.