$X bulls rack up big gains overnight

Surprisingly strong quarterly numbers by U.S. Steel propelled upside option positions to huge profits today.

Just yesterday, Investitute’s tracking systems detected the purchase of 10,200 November $27 calls mostly in one print for $0.68 with shares at $25.13. This was clearly fresh buying, as volume was well above the strike’s open interest of 7,504 contracts. Investitute co-founder Jon Najarian cited the unusual activity in the afternoon on CNBC’s “Halftime Report.”

Those calls traded up to $2.58 this morning, nearly 4 times its purchase price. The stock rose 16.3 percent at the same time, showing how quickly options can far outpace gains in 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.

X jumped 7.82 percent today to close at $27.30. The steel maker raised its outlook after beating earnings and revenue estimates last night.