Schnitzer Steel rallied along with the rest of the market
yesterday, but one investor sees limited upside in the scrap-metal
optionMONSTER's tracking systems detected the purchase of 2,288
July 40 calls for $0.75, followed seconds later by the sale of an
equal number of August 40 calls for $2.10. Volume was below open
interest in the July contracts but not August, indicating a short
position in the calls was rolled forward by one month.
SCHN rose 3.79 percent to $39.16 yesterday but is down 28 percent
since April. The steel company has gotten punished along with other
industrial-metal companies amid worries about the strength of the
global economy. A day earlier the Wall Street Journal reported
ominously that steel prices fell in June.
Yesterday's option trade allowed the investor to collect $1.35 of
premium in return for sticking with the short position for an
additional month. It could have been implemented by a shareholder
as part of a covered call strategy or as a naked position by trader
with a negative outlook on the shares. (See our Education section)
The trade reflects a belief that upside in SCHN will be limited at
$40. Chart watchers may consider the level important because it
served as support in late January and again in June.
Overall option volume in the name was five times greater than
(Chart courtesy of tradeMONSTER)
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