Steel Dynamics has been ripping, and the bulls think it will keep running into early 2015.
optionMONSTER's tracking systems detected the purchase of about 1,400 February 24 calls for $0.50 and 2,100 February 22 calls for $1.25 and $1.30. Volume exceeded open interest at both strikes, which indicates new money was put to work on the long side.
Calls lock in the price where investors can buy a stock, allowing them to control a rally with limited cost. They can also generate significant leverage if shares move in the right direction. (See our Education section.)
STLD rose 0.33 percent to $21.51 yesterday, and is up 17 percent in the last month. Most of that move came after quarterly revenue beat expectations and the company bought domestic steel plants from Russia's Severstal in late July. It's also back above its 2011 high, so Wednesday's trader was looking for the stock to retrace its big drop in 2008.
It was additionally noteworthy that he or she calls at two strikes. They can later sell more contracts in the middle if they want to create a so-called butterfly spread .
Total option volume was twice the daily average in the session, with calls outnumbering puts by 73 to 1.
(A version of this post appeared on InsideOptions Pro yesterday.)
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.