$NEM bulls double their money in a day

Newmont Mining appears to be breaking out, and it’s taking upside option traders along for the ride.

Just yesterday, Investitute’s tracking systems found that 4,400 Weekly $36.50 calls expiring on Sept. 8 were purchased for $1.27 to $1.52 with shares at $37.70. Open interest was only 40 contracts before the activity appeared, showing that this was fresh buying.

Today those calls traded for $2.40, nearly doubling in 24 hours. The stock was up less than 2.8 percent at the same time, showing how quickly options can far outperform gains in their underlying shares. Investitute co-founder Pete Najarian cited the calls this afternoon on CNBC’s “Halftime Report.”

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.

NEM closed today off 0.68 percent to $38.04 but reached a high of $38.89 in the morning. The precious-metals miner, which has benefited from the recent rally in gold along with other miners, displayed a “golden cross” pattern on its chart when its 50-day moving average rose above its 200-day line yesterday.