Traders dig up profits in $NEM

Option traders have turned quick profits on bullish positions in Newmont Mining.

On Dec. 7, Investitute’s market scanners identified the purchase of 6,400 December $34 calls for $0.38 to $0.41 with shares at $32.94. Volume was well above the strike’s previous open interest of 2,137 contracts, showing that this was fresh buying. Investitute co-founder Pete Najarian also cited heavy buying in February $36 a few sessions later on CNBC’s “Halftime Report.”

The December calls trade for $0.80 today, twice their purchase prices. The stock rose 4.01% in the same time frame, illustrating the kind of leverage that can be achieved with options.

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.

NEM reached $36.60 early this morning, its highest price since Aug. 14, before ending the session up 1.64% at $34.16. The precious-metals miner has risen with the price of gold and silver in recent weeks.