One investor apparently thinks that Commercial Metals isn't done
The Texas-based steel stock gapped higher last week after
billionaire investor Carl Icahn made a $15-per share hostile
takeover bid, and it has been drifting sideways since then. CMC is
up 1.49 percent to $14.30.
optionMONSTER's tracking systems detected the purchase of 3,000
January 12 puts for $0.35 and 3,000 January 14 calls for $1. Volume
was more than 8 times open interest in both strikes. The strategy
resulted in a cost of $1.35 and is designed to profit from a sharp
move in the stock.
Given the recent news, the investor may expect Icahn to attempt a
higher price after CMC's board rejected the offer. In that case,
they would profit from the calls. Alternatively, the trader may
expect sellers will hammer the stock lower, which would boost the
value of the puts.
Known as a
, the trade is a common way that investors use options to bet on
rather than a move in a specific direction. (See our
The transaction pushed total option volume in the name to more than
twice the daily average.