$XOP bulls see barrel-sized gains

Bullish option traders have nearly tripled their money in the SPDR S&P Oil & Gas Exploration & Production Fund.

On April 11, Investitute’s tracking systems detected the purchase of 18,000 June $34 calls bought from $3.65 to $3.67 with shares at $35.61. These were clearly new positions, as volume was well above the strike’s open interest of 1,121 contracts.

Those calls were marked at $10.15 this afternoon, nearly 3 times their original purchase price. The stock rose 24% in the same time period, underscoring how options can far outperform their underlying shares.

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.

XOP was up 2.46% today to close at $44.22. The exchange-traded fund has rallied as its holdings have gained with the price of crude continuing to make new multi-year highs.