Bulls discover liquid gold in $XOP

Upside option positions continue to draw huge gains from the SPDR S&P Oil & Gas Exploration and Production Fund.

On Sept. 19, Investitute’s proprietary programs identified the purchase of 18,400 October $33 calls mostly in one print of 13,167 for $0.60 with shares at $32. This was clearly a new position, as volume was above the strike’s open interest of 11,699 contracts.

Today those calls traded up to $1.61, more than 2.5 times their purchase price. The stock rose 7 percent in the same time frame, illustrating the type of leverage than can be achieved with options. It was the second winning call trade in the fund posted on Investitute this week.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

XOP ended today’s session off 0.32 percent to $34.09 but has rebounded sharply as enery producers recover from the twin hurricanes. This week the price of crude reached its highest levels since April.