$CLF bulls double their money

Option traders collected quick profits in Cleveland-Cliffs today.

On Jan. 2, Investitute’s proprietary programs flagged the purchase of 2,000 February $8 calls for $0.59 to $0.67 with shares at $7.81. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 951 contracts.

Those calls sold for $1.22 this afternoon, about twice their average purchase price. The stock rose 12.8% in the same time frame, showing how quickly options can far outpace gains in 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.

CLF was up 3.07% to $8.73 today. The iron-ore producer rebounded as the dollar pulled back and optimism grew over U.S.-China trade talks.

(Disclosure: I am long CLF.)