Dow Chemical is bouncing, and traders are placing extremely
optionMONSTER's Heat Seeker monitoring program detected quick
buying in the Weekly 41 calls expiring today, for $0.41. The
chemical stock was at $41.31 when the options hit, so those
in the money
with only hours to perform.
DOW subsequently pushed higher, and is now up 1.68 percent to
$41.44 afternoon trading. Those calls have also appreciated about
50 percent to $0.63, which shows the kind of leverage that can be
generated with options.
It works because
lock in a price where the stock can be purchased. That lets
investors cheaply position for a rally. (See our
The Heat Seeker also shows buying in the December 43.50 calls,
which expire at the end of next week, for $0.19. More than 2,000
contracts have traded in both those options and the Weekly 41s.
DOW has spent the last three months consolidating below its 2011
high around $42 but recently bounced at its 100-day moving average.
The shares then pulled back again and have been rebounding since
being cited as an attractive long play on yesterday's closed-door
webinar with optionMONSTER co-founder Pete Najarian.
Total option volume is still below average in the name, but calls
outnumber puts by a bullish 3-to-1 ratio.
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