Bulls triple their money in $CLF

Cleveland-Cliffs has risen with other steel-related names this week, yielding large profits on upside option positions.

On Feb. 5, Investitue’s tracking systems detected the purchase of 13,000 March $7 calls for $0.37 to $0.50 as part of a bullish roll with shares at $6.67. These were clearly fresh buying, as volume was well above the strike’s open interest of 4,138 contracts.

Those calls traded up to $1.21 today, more than 3 times their original purchase price. The stock rose 21.6% 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.

CLF was up 2.58% to $7.95 today. The producer of iron ore, which is used to manufacture steel, rallied sharply yesterday after President Trump announced tariffs on foreign imports.

(Disclosure: I am long CLF.)