$AA bulls quadruple their money

Upside option positions opened in Alcoa at the end of last week are already paying huge returns.

On Friday, Investitute’s market scanners found that 1,400 Weekly $48 calls expiring on April 13 were purchased for $0.95 to $1.20 with shares at $48.29. This was clearly fresh buying, as open interest in the strike was only 227 contracts before the trades occurred.

Those calls swelled above 9,300 by the end of that session and sold for $4 today, more than 4 times their original purchase price. The stock rose 7.5% at the same time, 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.

AA jumped 5.35% to $50.62 today. The Pittsburgh-based aluminum producer rallied after the federal government imposed sanctions on Russian rival United Company Rusal. Alcoa is scheduled to report earnings on April 18 after the market closes.