Call prices rise in $AA

Option traders who opened upside positions in Alcoa (AA) are piling up big profits for the second session in a row today.

On Nov. 17, Market Rebellion’s Unusual Activity Service flagged the purchase of 4,000 January $20 calls for $0.79 to $0.82 as part of a bullish spread with shares at $17.89.

Those calls have traded for as much as $3.00 so far today, more than 3.5 times their purchase prices. The stock rose 22.75% in the same time frame, illustrating the kind of leverage that can be achieved with options.

It marks the second winning trade in the name posted by Market Rebellion in as many sessions.

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 higher by 10% to $21.89this afternoon. The aluminum producer’s price target was raised to $20 from $14 at B. Riley Securities this morning.