$RIG bulls double money fast

Option traders showed strong conviction in Transocean (RIG) recently, and today their upside plays are paying off.

Investitute’s market scanners identified unusual option activity in the same RIG strike on two consecutive sessions in recent days:

–On June 14, 20,000 Weekly $6 calls expiring on July 12 were purchased in one print for $0.17 above open interest of 2,661 contracts with shares at $5.41.
–On June 17, 6,000 Weekly $6 calls in the same expiration were bought for $0.15 to 0.$18 below open interest of 23,165 contracts but apparently adding to the previous volume with shares at $5.44.

Investitute co-founder Pete Najarian cited the bullish activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $0.38 today, more than double their purchase prices. The stock rose 9.8% in the same time frame, underscoring how options can far outperform their underlying shares.

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.

RIG is up 6.72% to $5.96 in afternoon trading. The offshore energy driller has rallied off multi-year lows along with the call buying in the last few sessions.