Calls rocket 5-fold in $MT

It took just three sessions for bullish option traders to post exponential gains in ArcelorMittal (MT).

On Oct. 31, Market Rebellion’s tracking systems found that 8,200 Weekly $15.50 calls expiring this Friday were bought for $0.19 to $0.24 with shares at $14.67. This was clearly fresh buying, as open interest in the strike was only 306 contracts before the activity appeared.

Those calls traded for as much as $1.21 today, more than 5 times their purchase prices. The stock rose 12.88% 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 is up 0.36% to $16.51 this morning. The steel maker is scheduled to report earnings on Nov. 7.

(Disclosure: I am long MT.)