Bulls mine quick profits in $KGC

Option traders mined quick profits on upside positions in Kinross Gold (KGC) today.

On Dec. 15, Market Rebellion’s Unusual Option Activity Service flagged the purchase of 11,000 December $7.50 calls, expiring tomorrow, for $0.04 to $0.06 with shares at $7.06. Volume was above the strike’s existing open interest of 1,960 contracts, indicating that this was fresh buying.

Those calls traded for as much as $0.26 this morning, at least 4 times their purchase prices. The stock rose 9.35% in the same time frame, underscoring how quickly 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.

KGC was up 3.44% at $7.52 at the close. The Canadian-based gold and silver mining company traded higher into this morning, along with precious metals, after the FOMC minutes announcement yesterday.