$AUY bulls gift gains

Bullish option traders mined big gains in Yamana Gold (AUY) today.

On Dec. 22, Market Rebellion’s Unusual Activity Service detected the purchase of 10,000 Weekly $5.50 calls, expiring today, for $0.09 to $0.13 with shares at $5.48. This was clearly fresh buying, as open interest in the strike was only 830 contracts before the activity appeared.

Those calls traded for as much as $0.26 today, at least double their purchase prices. The stock rose 5.29% in the same time frame, underscoring how quickly options can far outperform their underlying shares.

This marks the second quick turnaround for short term upside call positions in precious metal miners posted on Market Rebellion in the last week.

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.

AUY reached $5.78 this morning before pulling back to close at $5.67, off 0.7% for shares of the Canadian miner.