Sentiment has been improving toward metal stocks, and one
investor is betting big on Brazilian steel maker Gerdau.
optionMONSTER's tracking systems detected heavy
the company, which still trades for less than book value despite
climbing 23 percent in the last three months. They first sold 3,100
June 8 contracts for $1, followed minutes later by 3,600 March 8s
for $0.80. There was barely any open interest at either strike, so
new positions were initiated.
The investor is on the hook to buy GGB for $8 on the respective
expirations, no matter how low it might be at the time. Above that
level, he or she keeps the premium and the contracts expire
worthless. Today's trade is unusual because they used
contracts, which increases their leverage to a rebound. (See our
GGB is up 0.46 percent to $7.72 in midday trading and has been
rebounding since hitting a four-year low of $5.27 in June. The
shares are now attempting to hold support around the same $7.50
level where they consolidated in September, which could make some
chart watchers bullish.
Steel makers have been outperforming the broader market recently as
investors find value in an industry that lagged for years and now
stands to benefit from a stronger global economy.
Total option volume in GGB is 13 times greater than average so far
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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