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Bull digs into metals, mining fund

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A trader is betting that the SPDR S&P Metals & Mining Fund will resume its recent rebound.

optionMONSTER's Heat Seeker tracking system detected the purchase of 2,000 October 39 calls in two prints for $0.85 yesterday. This is clearly a new position, as open interest in the strike was just 76 contracts before the trades appeared.

These long calls lock in the price where the trader can buy the stock through mid-October no matter how far it might rise. The options could be sold earlier at a profit if premiums gain with a rally before then, but the contracts will expire worthless if shares remain below $39 for the next two months. (See our Education section)

The XME rose 3.22 percent yesterday to $37.14, closing back above its 100-day moving average. The exchange-traded fund began the year at $46.51 and hit a four-year low of $31.83 on June 24. It had been working its way higher since then but encountered resistance near the $38 and pulled back with the rest of the market this week.

Overall XME calls outpaced puts by nearly 2.5 to 1.

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