Call buyers score in $AA at highs

Option traders who opened upside positions in Alcoa (AA) just last week are piling up big profits today.

On Feb. 9, Market Rebellion’s Unusual Activity Service found that 5,600 February $74 calls, expiring today, were bought for $1.58 to $1.90 above the previous open interest of just 130 with shares at $71.58.

Those calls traded for as much as $4.11 today, more than double their purchase prices. The stock rose 9.12% 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.

AA was last higher by 1.99% at $77.99this afternoon.