$RIG call prices double in hours

Option traders who opened bullish positions in Transocean yesterday morning were collecting substantial profits by the afternoon.

A little more than an hour into the session, Investitute’s market scanners found that 4,100 Weekly $11.50 calls expiring on Jan. 26 were purchased for $0.16 to $0.18 with shares at $11.24. These were clearly new positions, as open interest in the strike was only 351 contracts before the trades occurred.

Those calls sold for $0.37 by the end of the day, more than double their original purchase price. The stock rose 3.7 percent at the same time, showing how quickly options can far outpace gains in their underlying shares.

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.

RIG was up 2.47 percent yesterday to close at $11.60. The offshore driller has rallied with other energy names as the sector has made a comeback in recent months.