$USO call prices rocket 3-fold

Bullish option traders have turned fast profits with the sharp increase in the U.S. Oil Fund (USO).

On Apr. 1, Market Rebellion’s Unusual Activity Service found that 50,000 May $5 calls were bought for $0.43, as part of a bullish spread, with shares at $4.33. This was clearly fresh buying, as open interest in the strike was 12,003 contracts before the session began.

Those calls traded for as much as $1.56 this afternoon, more than 3 times their purchase price. The stock spiked 38.57% in the same time period, a large move but nowhere near that of its options on a relative basis.

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.

USO popped 15.46% to $5.90 today. The exchanged-traded fund rose sharply off its recent lows of $4.03 after U.S. President Trump voiced hope for a production cut from Saudi Arabia and Russia yesterday morning.