Call buyers mining Vale for profits


Industrial metals have been coming back to life, and the bulls were piling into Brazilian miner Vale at the end of last week.

optionMONSTER's Heat Seeker system shows that 9,400 August 15 calls traded for $0.14 to $0.18 on Thursday in volume far above previous open interest of just 867 contracts. There was also heavy buying in the Weekly calls expiring this Friday, with 5,100 of the 14.50s going for $0.05 to $0.08 and 3,500 of the 13.50s for $0.38 to $0.58, also all above open interest.

These long calls lock in the price where the stock can be purchased, providing potentially significant leverage to the underlying shares. But the contracts can quickly lose value if the stock stalls or pulls back. (See our Education section)

VALE gained 2.41 percent to $14.03 on Thursday. The stock pulled back from its recent high of $15.59 in early April bounced off support around $12.50 in mid-June, and shares have been grinding higher since. Investors are returning to metals and materials in response to strong economic data in the United States and China, according to our researchLAB market-analysis tool. (See related story )

Thursday's overall option volume in the name was more than double its full-session average, with calls making up a bullish 83 percent of the total.

(A version of this post appeared on InsideOptions Pro on Thursday.)

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