$XLE option bulls score profits

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

On Friday, Oct. 1, Market Rebellion’s Unusual Activity Service found that 12,500 Weekly $53 calls, expiring this Friday, were bought for $0.82 to $1.26 above the existing open interest of 8,425 contracts with shares at $52.57.

Those calls traded for as much as $2.53 today, more than 2 times their purchase price. The stock rose 5.16% 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.