$XLE calls double in two sessions

The SPDR Energy Fund has been gaining strength this month, handing quick profits to bullish option traders.

Last Thursday, Investitute’s tracking systems detected the purchase of 22,500 January $71.50 calls for $0.83 as part of a bullish roll with shares at $70.95. This was clearly a new position, as open interest in the strike was only 2,052 contracts before the trade occurred. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded for $1.90 today, more than doubling their purchase price. The stock rose 2.5 percent at the same time, reflecting the type of leverage that can be obtained with options.

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.

XLE was up 0.88 percent to $72.60 today. The exchange-traded fund has risen with the price of oil, which broke $60 a barrel today for the first time since June 2015. Exxon Mobil and Chevron, its top two holdings, together make up nearly 40 percent of the ETF.


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