Fast money piles into Dow Chemical

optionMONSTER

Dow Chemical is bouncing, and traders are placing extremely short-term bets.

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.


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