Upside option positions in Century Aluminum are paying exponential returns.
On May 31, Investitute’s market scanners detected the purchase of 13,800 July $16 calls for $0.38 to $0.50 with shares at $13.94. Open interest in the strike was a mere 57 contracts before the trades occurred, showing that they were new positions.
Those calls traded for $1.65 today, more than tripling in value. The stock rose 20.2 percent in the same period, an impressive gain but nowhere near that of the options.
Long calls lock in the price where the 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.
CENX was up 0.31 percent today to close at $16.43. The aluminum producer rallied after its last quarterly results on April 25 and hit a 52-week high of $17.28 last Friday.