Year-end breakout for Archer Daniels?


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One big investor doesn't want to miss a breakout in Archer Daniels Midland.

optionMONSTER's Heat Seeker monitoring system detected the purchase of almost 10,000 December 38 calls, most of which priced for $1.60. Volume was more than 36 times open interest at the strike.

He or she has now locked in a $38 entry price on the grain processor through Dec. 20, no matter how high it may trade during that time. That's the same level where it peaked in early 2011.

Using long calls lets traders avoid missing a big rally in the stock while limiting the amount of capital at risk in a pullback. The cheap cost of the options relative to their underlying equity can also result in significant leverage on a percentage basis in a rally. (See our Education section)

ADM is up 1.34 percent to $36.96 in afternoon trading and has risen 34 percent so far this year. Earnings come out before the opening bell on Tuesday. The last report on May 1 missed expectations after drought conditions reduced grain harvests.

Total option volume is more than 5 times greater than average in the name so far today, according to the Heat Seeker. Calls outnumber puts by 17 to 1.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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