Call prices spike higher in $MT

It took just one session for bullish option traders to make exponential gains in ArcelorMittal (MT).

Yesterday morning, on Feb. 5, Market Rebellion’s Unusual Option Activity Service found that 3,100 Weekly $16.50 calls expiring tomorrow were bought for $0.15 to $0.16 with shares at $15.78. This was clearly fresh buying, as open interest in the strike was only 1,203 contracts before the activity appeared.

Those calls have traded for as much as $1.32 today, more than 8 times their purchase prices. The stock rose 12.8% in the same time frame, illustrating how quickly options can far outperform their shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

MT was last up by 9.84% at $17.52. The steel maker has rallied today after reporting earnings before the opening bell.