Call buyers unearth overnight profits in $VALE

Call buyers unearth overnight profits in $VALE


Vale (VALE) is rising sharply today, returning big profits on upside option positions opened yesterday.

Yesterday on Jun. 1Market Rebellion’s Unusual Option Activity Service found that 5,000 June $13 calls were bought for $0.39 to $0.40 with shares at $12.85. This was clearly fresh buying, as open interest in the contract was just 1,463 before the activity appeared.

Those calls have traded for as much as $0.94 today, a 135% return, while the stock rose 7.08% at the same time, showing how 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 was last higher on the day by 4.45% at $13.62.

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