Call buyers unearth big profits in $VALE

Vale (VALE) has risen sharply this month, returning big profits on upside option positions opened a month ago.

On Dec. 14Market Rebellion’s Unusual Option Activity Service found that 5,000 Weekly $17.50 calls, expiring Jan. 27, were bought for $0.50 with shares at $16.33. This was clearly fresh buying, as open interest in the contract was just 19 before the activity appeared.

Those calls traded for as much as $1.07 this session, more than 2 times their purchase price. The stock rose 13.23% at the same time, underscoring how quickly options can far outperform 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.

VALE closed higher on the day by 2.09% at $18.52.

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