U.S. Markets closed

Bulls clean up with Dow Chemical

David Russell (david.russell@optionmonster.com)

Traders made a killing in Dow Chemical on Friday, riding a wave of bullish sentiment in the materials sector.

optionMONSTER's tracking programs detected heavy volume in the September 39 calls, with large blocks pricing early for $0.33 to $0.43. The chemical stock was up about 1 percent when the first trades hit.

These long calls lock in the price where shares can be purchased, letting investors position for potential gains while controlling the amount of capital at risk. Given their relative inexpensive cost, the contracts can generate significant leverage relative to the underlying stock.

That's exactly what happened on Friday. DOW continued to advance, ending the session up 3.06 percent to $38.04, and those calls roughly doubled to $0.83 in the process. (See our Education section)

The company is the third-biggest holding in the SPDR Materials Fund, which was the only major sector exchange-traded fund to close the session higher. Materials also rallied on Thursday after strong Chinese trade numbers suggested that economic activity is quickening in the world's most-populous country.

Overall option volume was 13 times greater than average in DOW, with calls outnumbering puts by a bullish 7-to-1 ratio.

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

More From optionMONSTER