$AKS calls double overnight

It took less than 24 hours for option traders to post substantial profits in AK Steel.

Yesterday afternoon, Investitute’s tracking systems detected the purchase of 10,000 June $4.50 calls for $0.20 and $0.21 with shares at $4.51. This was clearly fresh buying, as volume was far above the strike’s open interest of 1,388 contracts. Investitute co-founder Pete Najarian cited the unusual activity on CNBC’s “Fast Money” program last night.

Those calls traded for $0.50 this morning, 2.5 times their purchase prices. The stock rose 8.9% at the same time, showing the kind of leverage that can be achieved quickly with options.

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.

AKS spiked to $4.92 this morning before pulling back to close at $4.52, off 1.32% on the session. The steel maker rallied in after-hours trading last night on news reports that the White House is planning to impose steel and aluminum tariffs on European imports, following a decision to proceed with levies on Chinese products as well.