Bulls quadruple their money in $DO

Diamond Offshore surged on strong quarterly numbers today, providing exponential returns on upside option positions.

On Oct. 20, Investitute’s tracking systems lit up with the purchase of 11,600 November $17.50 calls for $0.17 to $0.32. These were clearly new positions, as volume far surpassed the strike’s open interest of 1,301 contracts.

Those calls traded for $0.70 today, more than 4 times their original purchase price. The stock rose 13.7 percent in the same time frame, underscoring how options can far outperform their underlying shares.

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.

DO jumped 9.49 percent to $17.31 today. The offshore driller beat earnings estimates before the market opened this morning.