Traders are reaping huge gains today on bullish positions opened three months ago in ConocoPhillips.
Back on July 24, Investitute’s proprietary programs cited the purchase of 2,900 November $45 calls for $1.37 with shares at $42.72. This was clearly a new position, as open interest in the strike was only 545 contracts before that session began.
Those calls traded for $6.75 today, 5 times their purchase price. The stock rose 21 percent in the same time period, an impressive move but nowhere near the gains made by 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.
COP was up 3 percent today to close at $51.46. The oil and gas producer topped earnings forecasts this morning.