Call prices rise in $AA

Option traders who opened upside positions in Alcoa (AA) two months ago are piling up big profits.

On Sep. 25, Market Rebellion’s Unusual Activity Service flagged the purchase of 10,500 January $14 calls for $0.70 to $0.78 with shares at $11.43. Volume was above the strike’s previous open interest of 1,156 contracts, indicating that this was fresh buying.

Those calls have traded for as much as $6.40 so far today, more than 8 times their purchase prices. The stock rose 77.17% 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 is down 1.42% to $20.18 this afternoon. The aluminum producer has rallied sharply over the past two months to near its January 2020 levels, alongside its peers.