$AA bulls turn quick profits

It took only three days for option traders to triple their money in Alcoa.

On Aug. 8, Investitute’s tracking systems detected the purchase of 6,200 August $44.50 calls for $0.35 to $0.60 with shares at $43.32. This was clearly fresh buying, as open interest in the strike was only 165 contracts before the activity appeared.

Those calls traded up to $1.30 today, more than 3 times their initial purchase price. The stock rose 4.02% in the same time frame, showing how quickly options can far outperform their underlying shares. Investitute co-founder Jon Najarian cited even more buying in AA calls that expire later this month on CNBC’s “Halftime Report” this afternoon.

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.

AA jumped 4.63% to $44.98 today, bucking the downturn in the broader market. Trading volume in the shares topped 7.6M, nearly double its daily average.