$MT calls turn quick profits

It took only a few days for bullish option traders to double their money in ArcelorMittal.

On Feb. 12, Investitute’s proprietary programs showed that 10,000 Weekly $23 calls expiring on March 1 were purchased for $0.27 to $0.33 with shares at $21.91. This was clearly a new position, as open interest in the strike was a mere 213 contracts before that session began.

Those calls traded for as much as $0.70 this afternoon, more than twice their purchase prices. The stock rose 5.39% in the same time frame, 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 4.86% to $23.08 today. Steel makers and other industrial companies have rallied recently on optimism over progress in U.S.-China trade negotiations.

(Disclosure: I am long MT.)