$AXL bulls double their money

Traders have posted sizable profits on options that expire this week in American Axle & Manufacturing.

On May 4, Investitute’s proprietary programs cited the purchase of 4,400 May $15 calls for $0.45 to $0.50 with shares at $15.02. This was clearly fresh buying, volume was far above the strike’s open interest of 1,345 contracts.

Those calls traded for $0.95 today, twice their initial purchase price. The stock rose less than 6% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

AXL was up 2.51% to $15.95 today. The drivetrain manufacturer beat first-quarter estimates on the top and bottom lines earlier this month.