$CLF bulls score overnight gains

Option traders tripled their money today in cheap bets placed on Cleveland-Cliffs only one session earlier.

Just yesterday, Investitute’s tracking systems detected the purchase of 10,000 February $12.50 calls for $0.09 as part of a bullish spread with shares at $10.83. Open interest in the strike was only 544 contracts before the trade occurred, showing that this was a new position. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls traded up to $0.31 today, more than 3 times their purchase price. The stock rose 11.73% at the same time, illustrating the kind of leverage that can be achieved quickly with options.

In another trade on Feb. 6, Investitute’s scanners showed that 5,000 Weekly $11 calls also expiring today were purchased for $0.36 above open interest of 3,353 contracts with shares at $10.87. Those calls sold for as much as $1.23 today, just shy of 3.5 times their purchase price.

These followed winning trades in Cliffs posted on Investitute on Jan. 30 and Jan. 3.

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 jumped 8.53% to $11.83 today. The iron-ore producer missed quarterly estimates but issued strong guidance before the market opened this morning.

(Disclosure: I am long CLF.)