Traders are looking for Alamos Gold to rally by next spring.

optionMONSTER's Heat Seeker system detected heavy buying in the March 2.50 calls yesterday, with more than 12,800 trading for $1.75 to $2.46. These are clearly new positions, as open interest in the strike was a mere 5 contracts before the session began.

These long calls lock in the price where the stock can be purchased through mid-March 2016 no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but will fall if shares pull back. Either way these calls will track the stock price closely because they are far in the money . (See our Education section)

AGI rose 7.32 percent to $4.40 yesterday, bucking the broader market's selloff, but has dropped more than 70 percent in the last two years as the price of gold has plunged. CIBC upgraded the mining stock to "sector outperform" from "sector perform" on Aug. 19, following similar moves by Raymond James and Canaccord Genuity in July.   

Total option volume in the name topped 14,200 yesterday, dwarfing its daily average of just 58 contracts for the last month. Overall calls outnumbered puts by 47 to 1, reflecting the session's bullish sentiment.


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