$XLE bulls double money overnight

The SPDR Energy Fund (XLE) traded higher today along with crude, delivering fast profits to short-term bullish option traders.

Less than 30 minutes before yesterday’s close, our Unusual Activity Service identified the purchase of 6,500 Weekly $31 calls for $0.17 to $0.18 with shares at $30.07. Volume was well above the strike’s open interest of 1,539 contracts, showing that this was a new position.

Those calls traded for as much as $0.35 so far today, at a minimum, double their purchase prices. The stock rose 2.29% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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.