$AEM bulls double money

Option traders have hit paydirt with upside positions in Agnico Eagle Mines (AEM).

On July 18, Our tracking systems detected the purchase of 4,927 January $55 calls for $3.78 as part of a bullish roll with shares at $53.34. This was clearly a new position, as open interest in the strike was only 1,542 contracts before that session began.

Those calls traded for as much as $9.84 today, more than 2.5 times their purchase price. The stock rose 17.27% in the same time period, underscoring how 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.

AEM rose 0.94% to $62.16 today. The Canadian gold and silver miners has rallied as the price of precious metals have risen.