$MT calls win before earnings

ArcelorMittal reports earnings later this week, but option traders are already making money on the name.

On July 23, Investitute’s proprietary programs flagged the purchase of 5,000 September $32 calls for $0.73 as part of a complex three-way spread with shares at $29.51. The strategy was employed four times in four sessions starting on July 19.

Those calls traded for $1.58 today, more than twice their purchase price. The stock rose 7.59 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.

MT was up 0.64% today to close at $31.47. The Luxembourg-based steel maker is scheduled to announce quarterly results before the market opens on Aug. 1.

(Disclosure: I am long MT.)