Call buyers double money in $VALE

Vale (VALE) has been rallying this past week, returning big profits on upside option positions.

On Mar. 1, Market Rebellion’s Unusual Activity Service found that 4,500 Weekly $9.50 calls, expiring this Friday, were bought for $0.35 to $0.38 with shares at $19.38. This was clearly fresh buying as open interest in the strike before the activity appeared was only 2,078.

Those calls traded for as much as $0.78 today, over 2 times their purchase prices. The stock rose 3.1% 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.

VALE was last higher by 2.52% at $19.96 in early trade.