$XOM option bulls strike a gusher

Upside option positions in ExxonMobil (XOM) paid off big today.

On Dec. 16, our Unusual Activity Tracking systems found that 23,864 February $45 calls were bought for $2.19 as part of both a bullish spread and roll with shares at $43.20. This was clearly fresh buying, as volume was well above the strike’s existing open interest of 9,088 contracts.

Those calls sold for as much as $7.35 today, well over 3 times their purchase price. The stock rose 21.18% in the same time period, a large move but nowhere near that of its options 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.

XOM ended the session up 4.3% to $52.10 today. The energy giant has continued to trade higher alongside the price of crude.