$XLU call prices triple in two sessions

The SPDR Utilities Fund rose for the 16th session out of the last 18 today, handing significant profits to upside option positions opened just two sessions before.

On July 3, Investitute’s tracking systems detected the purchase of 5,000 Weekly $52.50 calls, expiring on July 6, for $0.25 with shares at $52.49. This was clearly a new position, as volume was well above the strike’s open interest of 376 contracts.

Those calls traded for $0.74 today, just shy of three times purchase price. The stock rose 1.43% at the same time, 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.

XLU was up 0.78% to close at $53.17 today. The Utilities Select Sector SPDR Fund tracks a basket of utility companies and has been grinding higher as interest rates have slowed from their previous acceleration.