Short-term calls strike pay dirt in $ABX

It took only four sessions for bulls to quintuple their money in Barrick Gold.

Last Thursday, Investitute’s scanners found that 2,400 Weekly $17.50 calls expiring this Friday were purchased for $0.12 and $0.13 with shares at $17.04. These were clearly new positions, as open interest in the strike was just 360 contracts before the activity appeared.

This morning those calls traded up to $0.64, an average gain of 400 percent. The stock rose 6 percent in the same time frame, illustrating 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.

ABX closed today up 1.02 percent to $17.82 but hit $18.09 right after the open. The company rallied with other miners as the price of gold rose amid fears stemming from the North Korean missile that was fired over Japan last night.