Fast money piles into Dow Chemical
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 contracts were 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 long calls lock in a price where the stock can be purchased. That lets investors cheaply position for a rally. (See our Education section)
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 Market Action 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.