$CLF call prices triple in days

Option traders have turned quick profits on bullish positions in Cleveland-Cliffs (CLF).

On Oct. 9, Market Rebellion’s activity scanners found that 5,000 Weekly $7.50 calls expiring this afternoon were bought for $0.05 and $0.06 with shares at $7.13. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 2,317 contracts.

Those calls traded for as much as $0.15 so far today, 3 times their initial purchase price. The stock rose 7% 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 4.32% to $7.61 in the final hour of trade today. The iron-ore producer rallied along with other industrial-metal stocks following positive news on U.S.-China trade negotiations.

(Disclosure: I am long CLF.)