$AA bulls keep racking up profits

Alcoa has been ripping higher all week, handing yet another winning trade to upside option traders today.

Just yesterday, Investitute’s market scanners found that 3,400 Weekly April $55 calls expiring tomorrow were purchased for $0.25 to $0.48 with shares at $53.57. These were clearly new positions, as open interest in the strike was only 379 contracts before the activity appeared.

Those calls traded as high as $0.75 today, 3 times their initial purchase price. The stock rose 3.2% at the same time, showing how quickly options can far outpace gains in their underlying shares. It was the third winning Alcoa trade posted on Investitute in the last four days.

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 was up 0.93% to close at $54.47 today. The Pittsburgh-based aluminum producer rallied this week after the federal government imposed sanctions on Russian rival United Company Rusal. Alcoa reports earnings on April 18.