E.I. du Pont de Nemours & Co. (NYSE: DD )
dropped into the red after trading up out of the gate on Tuesday
without any notable news from the company. Heavy call volume has
accumulated in the September options expiration month thanks to an
investor who appears to have expressed bullishness on the chemicals
At 10:29 a.m. EDT, roughly 3,800 September 45-strike calls
changed hands versus current open interest of just 76 contracts.
The options traded in several large blocks for 30 cents per
contract, which was closer to or at the ask when the largest lots
crossed the tape. It looks like some investors expect DD shares to
rally another 8% during the next month and are willing to commit a
hefty amount of capital to place that bet.
The investors who bought these calls to open will make money if
DD shares are trading higher than the breakeven level of $45.30.
Maximum profit on this bullish trade is theoretically unlimited if
the stock continues to the upside. In this way, this long call
trade is similar to a long stock position. Risk on long call
trades, however, are limited to the premium paid. In this trade,
the investor risks 30 cents per contract if the stock is trading
below the strike price at expiration.
Return on risk for this long call trade is theoretically
unlimited to the upside. If the price of these near-dated calls
apprecite with or without a significant move in the stock, the
investor could choose to sell back the options and take profits
instead of holding them until expiration.
DD shares dropped 80 cents, or nearly 2%, to $41.68 during
morning trading. The stock reached a new 52-week high yesterday of
$42.54, and has since pulled back roughly 2%. The stock soared on
Aug. 5 because Cramer mentioned the stock positively.