Bulls triple their money in $RDC

Option traders are scoring big in Rowan Companies, which has rebounded sharply with the price of oil in the last month.

On Sept. 26, Investitute’s market scanners identified the purchase of 2,200 October $12 calls for $0.69 to $0.75 with shares at $12.13. These were clearly new positions, as open interest in the strike was only 874 contracts before the activity appeared.

This morning those calls traded for $2.10, triple their original purchase price. The stock rose 15.4 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.

RDC rose 1.46 percent to $13.91 today. The offshore-drilling services provider is scheduled to announce quarterly results before the market opens on Nov. 1.