How $ESV calls surged sevenfold

Bullish traders turned significant profits in Ensco today after its stock had been cut in half over the last year.

On Dec. 18, Investitute’s proprietary programs identified the purchase of 7,500 January $6 calls for $0.10 with shares at $5.23. This was clearly a new position, as volume was above the strike’s open interest.

Those calls traded for $0.70 today, 7 times their purchase price. The stock has jumped 27 percent in the same time frame, a large move but nowhere near that of its options.

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.

ESV rose 7.13 percent to close at $6.61 this afternoon. The offshore driller broke out of a three-month range today as the energy sector has rallied with the price of oil.