Call buyers hit a gusher in $NBR

Option traders have more than quadrupled their money in Nabors.

On Oct. 27, Investitute’s market scanners identified the purchase of 7,600 January $7 calls for $0.25 and $0.26 with shares at $5.38. Volume was well above the strike’s open interest, indicating that these were new positions.

Those calls sold for $1.16 this afternoon, more than 4.5 times their original purchase price. The stock surged 51.7 percent in the same time period, a huge gain but still well below that of its options on a relative basis.

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.

NBR rose 5.94 percent to $8.02 today. The energy-drilling services company has rallied with the rest of the sector as the price of oil has traded to its highest level in more than three years.