Bulls triple their money in $XLE

Option traders continue to rack up exponential gains in the SPDR Energy Fund as the sector rebounds.

On Dec. 22, Investitute’s tracking systems detected the purchase of 30,000 January $72.50 calls for $0.95 with shares at $71.90. This was clearly a new position, as volume was well above the strike’s open interest of 11,249 contracts. Investitute co-founder Pete Najarian cited unusual XLE activity on CNBC’s “Halftime Report” in the previous session.

Those calls ended today’s session at $2.68, nearly 3 times their purchase price. The stock rose 4.2 percent in the same time frame, showng how quickly options can far outpace gains in their underlying shares. It is the second winning XLE trade 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.

XLE ended today’s session off a penny at $74.99. The exchange-traded fund, which is weighted heavily toward Exxon Mobile and Chevron with about 40% of its holdings in those names, has climbed to 52-week highs as the sector has rallied sharply.