Call buyers forging huge gains in $ATI

Allegheny Technologies has been ripping higher in recent weeks, and bullish option traders are reaping major rewards.

On July 17, Investitute’s market scanners found that 3,400 October $17.50 calls were purchased for $2.05 to $2.20 with shares at $17.96. This was clearly fresh buying, as open interest in the strike was only 890 contracts before the trades occurred.

Those calls sold for $6 today, nearly triple their original price. The stock rallied 30.8 percent in the same time period, a huge move but one that was still far below 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.

ATI ended today’s session up 1.43 percent at $23.46, not far from its 52-week high of $24. The high-performance metals producer gapped higher on Sept. 11 after Bank of America upgraded the name by two notches, to “buy” from “underperform,” and raised its price target to $24 from $16.