$TECK call buyers post quick gains

It took less than a week for option traders to more than double their money in Teck Resources.

Late last Thursday, Investitute’s market scanners identified the purchase of 3,000 October $21 calls for $0.95 and $0.98 with shares at $21.30. This was clearly fresh buying, as open interest in the strike was only 326 contracts before the trades occurred.

Those calls sold for $2.41 this morning, 2.5 times their purchase prices. The stock rose 9.4 percent in the same time frame, showing how options can far outperform their underlying shares. It was the second winning call trade in the name posted on Investitute this month.

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.

TECK was up 3.56 percent to $23.01 today. The Canada-based mining company announced this morning that it has received approval from the Toronto Stock Exchange to buy back up to 20 million shares starting next Tuesday, Oct. 10. Teck is scheduled to report earnings on Oct. 26 before the market opens.