$RIG call buyers triple money fast

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

Just this past Wednesday, on Dec. 4, Market Rebellion’s Unusual Option Activity Service detected the purchase of 3,000 Weekly $5.50 calls expiring today for $0.02 to $0.09 with shares at $5.32. This was clearly fresh buying, as open interest in the strike was only 1,143 contracts before that session began.

Those calls traded up to $0.27 today, triple their purchase prices. The stock rose 8.65% 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 6.3% to $5.66 in afternoon trading. The offshore energy driller has rallied off recent lows along with the price of crude, which is at levels not seen since September.