Option traders are posting big gains on positions opened in Marathon Oil the day after Thanksgiving.
On Nov. 24, Investitute’s market scanners found that 30,000 Weekly $15.50 calls expiring on Dec. 29 were purchased for $0.56 as part of a bullish roll with shares at $14.91. There was no open interest in the strike before the trade occurred, showing that it was a new position.
Those calls traded for $1.74 today, more than 3 times their purchase price. The stock rose 15.6 percent in the same time, illustrating how options can far outperform their underlying shares. It was the second winning trade in Marathon Oil posted on Investitute in as many weeks.
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.
MRO was up 2.13 percent to $17.26. The oil and natural-gas producer has received several analyst upgrades in recent weeks.
(Disclosure: I am long MRO.)