Option traders cashed in today with upside bets on beaten-down AK Steel.
On Nov. 13, Investitute’s tracking systems detected the purchase of 2,000 December $4 calls for $0.47 with shares at $4.28. This was clearly fresh buying, as open interest in the strike was only 793 contracts before the activity appeared.
Those calls sold for $1.11 today, more than double their purchase price. The stock rose 19.2 percent in the same time frame, reflecting the kind of leverage that can be obtained 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.
AKS was up 4.36 percent to $5.03 today. The company has rallied along with other steel makers as the Commerce Department adopts anti-dumping measures against foreign imports.