Calls look for more fuel in steel rally
The steel industry has been rallying on hopes of government-stimulus initiatives, and trades in two companies yesterday indicate that investors are looking for more gains.
Bullish option activity was detected first in Steel Dynamics in the morning and then in ArcelorMittal in the afternoon:
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STLD: 4,500 February 38 calls were purchased for $2.10 to $2.35 against open interest of 708 contracts.
MT : 4,250 June 11 calls were purchased for $0.26 against open interest of 13 contracts.
Long calls lock in the price where investors can buy stock, allowing them to profit from a rally with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis if shares move in the right direction. (See our Education section)
MT rose 2.21 percent to $8.34 yesterday and has rallied 29 percent in the last three months. STLD was up 1.91 percent to $38.86 and rocketd percent in the last three months.
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