$XLV bulls double their money in a day

Upside option positions in the SPDR S&P Health Care Fund turned large profits only 24 hours after they were opened.

Just yesterday, Investitute’s market scanners found that 39,000 November $84 calls were purchased for $0.49 to $0.59 with shares at $82.86. These were clearly new positions, as open interest in the strike was only 2,568 contracts before the trades occurred.

This morning those calls traded up to $0.93, doubling their original purchase price. The stock rose only 1.03 percent at the same time, showing how quickly options can far outpace gains in their underlying shares. Investitute co-founder Pete Najarian cited the unusual activity on CNBC’s “Halftime Report” yesterday afternoon and again on the network’s “Fast Money” program last night.

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.

XLV was up 0.14 percent to close at $83.28 today. The exhcange-traded fund rallied after two out of its top three holdings–Johnson & Johnson and UnitedHealth–reported strong quarterly results yesterday. The sector was also buoyed by hopes of progress negotiations to repeal Obamacare.