$AUY call prices surge 5-fold

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

On Feb. 14, Market Rebellion’s Unusual Activity Service found that 3,200 Weekly $4.50 calls expiring on March 6 were bought for $0.06 to $0.11 with shares at $4.26. This was clearly fresh buying, as open interest in the strike was only 265 contracts before that session began.

Those calls traded for as much as $0.44 today, more than 5 times their average purchase price. The stock rose 14.32% in the same time frame, underscoring how quickly 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.

AUY reached $4.94 this morning before pulling back to  $4.65 in midday trading, off 0.21% on the session. Shares of the Canadian miner have risen in recent weeks with the price of gold as investors have flocked to safe-haven assets.