Coal stocks have been hot, and now the bulls are turning to
mining-equipment maker Joy Global.
optionMONSTER's tracking systems detected the purchase of 3,000
January 60 calls for $2.32 and the sale of an equal-sized block of
January 62.50s for $1.46. Volume was more than twice the open
interest at each strike, indicating that these are new positions.
Owning calls confers the right to buy a stock at a certain level,
while selling them obligates the trader to unload shares if they
reach the strike price. In the case of yesterday's trade, the
investor can buy JOY for $60 and then sell the stock for $62.50,
translating into a spread of $2.50.
He or she paid $0.86 for that right and will realize a profit of
190 percent if the shares close at $62.50 or higher on expiration.
That's just 10 percent above yesterday's closing price, which shows
the kind of leverage that can be achieved with options.
JOY rose 1.91 percent to $56.63 and has been slowly working its way
higher since the summer. Based on yesterday's
call vertical spread
, traders are looking for the gains to accelerate into the New
Year. (See our
Total option volume was triple the daily average in the session,
with calls dominating the action.
(A version of this post appeared on
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