$UNG call prices light up at highs

Bullish option traders turned a hefty profit today on the U.S. Natural Gas Fund (UNG) in positions opened during two separate sessions over the past months.

Back on Jun. 30, Market Rebellion’s Unusual Activity Service found that 7,400 October $16 calls were bought for $.0.40 to $0.51 above the existing open interest of 1,414 contracts with shares at $12.95.

And then again on Aug. 20, Market Rebellion’s Unusual Activity Service found that an additional 5,000 of those same October $16 calls were bought for $.0.32 below the open interest of 7,716 contracts, but apparently adding to the earlier trade, with shares at $13.79.

Those calls sold for as much as $4.75 today, at least 9 times their purchase price. The stock rose 59% in the same time period, illustrating the kind of leverage that can be achieved 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.

UNG dropped 0.84% to $20.14 today after setting a new 52-Week high of $21.11 earlier in the session.