Call prices double overnight in $AA

Option traders who opened upside positions in Alcoa (AA) yesterday are piling up fast profits today.

On Jul. 20, Market Rebellion’s Unusual Activity Service found that 8,000 Weekly $35 calls, expiring next Friday, Jul. 30, were bought for $1.30 above the previous open interest of just 4,886 with shares at $34.85.

Those calls traded for as much as $2.73 today, more than 2 times their purchase price. The stock rose 35.95% 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 higher by 6.12% to close at $37.09 this afternoon. The aluminum producer topped earnings estimates during its quarterly report this past Thursday.