$XME bulls racking up quick profits

Option traders have more than doubled their money on upside positions in the SPDR S&P Metals and Mining Fund

On Jan. 3, Investitute’s market scanners identified the purchase of 10,000 February $28 calls for $0.62 as part of a bullish roll with shares at $26.16. Open interest in the strike was a mere 38 contracts before the trade occurred, showing that it was a new position.

Those calls traded up to $1.47 today, about 2.5 times their purchase price. The stock rose 8.75% 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.

XME was up 2.22% to $28.55 today. The exchange-traded fund, which includes producers and miners of industrial and precious metals, has rallied with recent weakness in the dollar and optimism on U.S.-China trade talks.