$XLY calls double bulls’ money

Option traders have turned big profits in the Consumer Discretionary Select Sector SPDR Fund (XLY).

On Jan. 10, Market Rebellion’s Unusual Activity tracking systems found that 40,113 February $129 calls were purchased for $1.25 as part of a bullish roll with shares at $126.79. Volume was far above the strike’s open interest of 638 contracts before the trade occurred, showing that it was a new position.

Those calls traded for $2.92 this afternoon, more than twice their purchase price. The stock rose 3.58% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

XLY rose today to close 0.79% higher at $130.78. The exchange-traded fund, which tracks a basket of consumer discretionary names such as McDonald’s (MCD) and Nike (NIKE), has risen to all-time-highs with the strength of the American consumer.