$HAL bulls quadruple their money

Halliburton has been ripping higher in recent weeks, handing exponential profits to option traders.

On Nov. 17, Investitute’s tracking systems detected the purchase of 10,000 January $42 calls for $1.48 to $1.51 as part of a bullish spread with shares at $41.79. This was clearly a new position, as volume was well above the strike’s open interest of 6,190 contracts.

Those calls traded up to $7.05 today, more than 4.5 times their original purchase price. The stock rose 17.1 percent in the same time period, underscoring how options can far outperform their underlying shares. Investitute co-founders Jon and Pete Najarian discussed Halliburton and other oilfield-service providers this afternoon on CNBC’s “Halftime Report.”

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.

HAL was up 0.1 percent today to close at $48.82. The energy stock has risen sharply this month as the price of crude reached its highest level in 2-1/2 years.