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Can Commercial Metals still run higher?

By: optionMONSTER
Posted: 11/29/2011 10:52:00 AM
Referenced Stocks: CMC

The bulls are looking for more upside in Commercial Metals.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 January 15 calls for $0.80 and the sale of an equal number of January 13 calls for $1.85. Volume was below open interest in the lower strike, which suggests that an existing long position was rolled higher.

The move let the investor collect $1.05 of premium while maintaining exposure to a rally in the steel company, which corporate raider Carl Icahn offered to acquire for $15 a share in cash.

That news sent CMC 24 percent higher yesterday, and it inched lower by 0.35 percent to $14.12 in morning trading today.

Investors often roll positions after a trade goes their way because it lets them take some profits while keeping the right to benefit from a continued move. (See our Education section for more on how options can be used to manage risk.)

Some 11,600 contracts have traded so far today, with calls outnumbering puts by 24 to 1.