Bulls post big profits in $STLD

It took barely a week for option traders to triple their money in Steel Dynamics.

On Feb. 13, Investitute’s market scanners identified the purchase of 5,000 March $50 calls in one print for $0.40 with shares at $44.76. This was clearly a new position, as open interest in the strike was only 94 contracts before the trade occurred.

Those calls sold for $1.51 today, more than 3.5 times their purchase price. The stock rose 10.2% in the same time frame, 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.

STLD ended today’s session down 1.47% at $48.14, giving up gains as the broader market fell. The company has rallied along with other steel makers as the federal government considers anti-dumping measures against foreign competitors.