Bulls double their money in $CLF

Cleveland-Cliffs has provided winning option trades all year, and today was no exception.

On Aug. 9, Investitute’s tracking systems detected the purchase of 3,800 September $9 calls for $1.35 to $1.57 with shares at $10.37. This was clearly fresh buying, as volume was well above the strikes’ open interest of 1,952 contracts before the trades occurred.

Those calls sold for $3.40 this morning, more than twice their purchase prices. The stock rose 19.58% in the same, illustrating 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.

CLF reached a 52-week high of $12.46 this morning before pulling back to close at $12.11, off 0.74% on the session. The iron-ore producer gapped higher on strong quarterly results in July and has been rallying this month with a weakened dollar.

(Disclosure: I am long CLF.)