$PAAS calls deliver another payload

Pan American Silver (PAAS) has delivered another payload of profits for bullish option traders.

On Aug. 1, Our Unusual Activity tracking systems detected the purchase of 4,000 January $16 calls for $1.40 to $1.65 with shares at $14.79. This was clearly a new position, as open interest in the strike was a only 1,345 contracts before that session began. Market Rebellion co-founder Pete Najarian made note of the unusual activity at that time on CNBC’s “Halftime Report.”

Those calls have traded for as much as $8.00 this morning, more than 5 times their average purchase price. The stock rose 55.78% in the same time period, illustrating the kind of leverage that can be achieved with options.

It is the second winning trade in the name for positions opened on the same day.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

PAAS is up 2.36% to $22.96 in morning trading. The miner has rallied to a new 5-Year high with the price of precious metals in recent weeks.