$CLF bulls double their money

Cleveland-Cliffs hit multi-month highs today, yielding significant returns on upside option positions.

On March 21, Investitute’s market scanners identified the purchase of 10,000 May $7 calls for $0.71 to $0.80 with shares at $7.27. This was clearly fresh buying, as open interest in the strike was only 1,047 contracts before that session began.

Those calls traded up to $1.48 today, more than double their initial purchase price. The stock rose 16.4% in the same time period, illustrating the kind of leverage that can be obtained 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.

CLF was up 3.09% to $8.33 today, its best close since Jan. 24. The iron-ore producer has rallied along with other industrial metals this week, breaking out of its recent range.

(Disclosure: I am long CLF.)