$XLE option bulls drill for big profits

The SPDR Energy Fund (XLE) is trading higher today, pumping profits to long-term bullish option traders.

Back on Apr. 8, Market Rebellion’s Unusual Activity Service found that 15,000 January $50.21 calls were for $4.17 as part of a bullish spread with shares at $48.47.

Those calls traded for as much as $12.70 today, more than 2 times their purchase price. The stock rose 29.92% 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.