$MT call prices double in hours

Bullish option traders posted substantial gains intraday on ArcelorMittal.

This morning Investitute’s market scanners found that 4,100 Weekly $36.50 calls expiring on March 2 were purchased for $0.39 to $0.45 with shares at $34.63. This was clearly fresh buying, as open interest in the strike was only 56 contracts before the session began. Investitute co-founder Pete Najarian cited the unusual activity today on CNBC’s “Halftime Report.”

Those calls ballooned in volume to nearly 15,000 and traded up to $0.72 less than three hours, almost doubling their original purchase price. The stock rose 2.9% at the same time, showing how quickly options can far outpace gains in their underlying shares.

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.

MT jumped 4.71% to $35.58 today. The company rallied along with other steel makers on hopes that the White House will strengthen anti-dumping measures.

(Disclosure: I am long MT.)