$CLF bulls mine big profits

Bullish option traders are mining big profits in upside positions opened in Cleveland-Cliffs (CLF).

On May 25, Market Rebellion’s Unusual Activity Service identified the purchase of 3,950 Weekly $20.50 calls, expiring today, for $0.40 to $0.50 with shares at $18.32. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 489 contracts.

Those calls have traded for as much as $4.00 so far today, more than 8 times their purchase prices. The stock rose 33.3% 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.

CLF is up 2.11% to $23.45 this afternoon, after setting a fresh multi-year high yesterday at $24.77. GLJ Research raised its price target for the shares to $28.35 from $22.09 yesterday morning.