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Traders turn bullish on U.S. Silica

Mike Yamamoto (mike.yamamoto@optionmonster.com)

U.S. Silica does not typically see much option activity, but yesterday option traders turned bullish on the name.

optionMONSTER's Heat Seeker tracking system identified buying in the October 22.50 calls, where 2,561 contracts traded for $1.35 to $1.75. Open interest in the strike was just 504 calls before the session began, indicating that new positions were established.

The volume wasn't huge, but it did stand out in a name that averages just 938 options a day. Total SLCA calls outnumbered puts by 4 to 1 yesterday, reflecting the bullish sentiment..

The long calls purchased yesterday lock in the price where traders can buy the stock through mid-October no matter how far it might rise. But these contracts will track the share price closely because they are in the money , and they will quickly lose value if the stock doesn't move soon. (See our Education section)

The company mines and sells commercial silica that has a broad range of uses, from oil and gas fracking to the production of paints and plastics. SLCA gapped lower after missing second-quarter estimates on July 31 but reaffirmed its full-year guidance. The heavily shorted stock has been range-bound since then but rose 4.05 percent yesterday to close at $22.89 after bouncing off its 50-day moving average.

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

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