Bullish Play in Arcelor Mittal: Options

CHICAGO (TheStreet) -- Arcelor Mittal(MT Quote) has rallied nearly 125% since its March lows, and we're seeing investors calling even more upside in the steel-and-iron manufacturer today.

Looking at the out-of-the-money Oct. 44 calls, nearly 15,000 of these options hit the tape during the first hour of trading today with the stock trading down 10 cents to $39.73 a share. These calls are home to current open interest of 151 contracts today, indicating that investors traded these options to open. MT shares are currently trading higher than $40.

These calls are currently trading up 25 cents on the day and have a delta of 25, meaning for every dollar move in the stock the calls should move by 25 cents. MT stock is currently down 32 cents, and the calls should have dropped roughly eight cents so far today. What does it mean if the calls are up and stock is heading lower? It means buyers are afoot and implied volatility is rising; it's now up to 50 from 43 at the close last night!

It's interesting to see significant call buying in MT without any news to catalyze this bullish activity. This could also be a stock replacement strategy, where the investor is selling shares, but buying the calls in case there is further upside. The call purchase could have less downside than owning the stock out right.