$GFI calls prices forge ahead

Option traders have forged exponential profits on upside positions in Gold Fields (GFI).

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in the name on two consecutive days in early April:

–On Apr. 6, 11,561 October $6 calls were purchased for $1.29 above open interest of 6 contracts with shares at $5.74.
–And on Apr. 7, 3,000 more October $6 calls were purchased for $1.22 below open interest of 11,803 contracts but apparently adding to the previous day’s trade with shares at $5.80.

Those calls traded for $6.60 today, at least 5 times their purchase prices. The stock rose as much as 116.55% in the same time period, a large move but nowhere near that of its options on a relative basis.

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.

GFI ended the day down 3.27% at $11.83 after trading at a new 52-Week high of $12.47 earlier in the session. The South African gold miner has rallied along with its peers and the price of precious metals recently.