Bullish Trader Bets on Olin Rebound

OptionMonster co-founder Pete Najarian provides options picks Monday, Wednesday and Friday in TheStreet.com's Deep in the Money Calls newsletter.

David Russell, reporter for OptionMonster.

NEW YORK (TheStreet) -- Olin(OLN Quote) has been falling for six weeks, and now one investor is using options to bet on a rebound.

A block of 16,500 November 12.50 calls were purchased yesterday for $3.30, according to OptionMonster's proprietary tracking program. Volume was more than six times open interest in the strike.

Olin rose 4.8% to $15.83 yesterday but is down 11% since hitting an eight-month high on Sept. 23. The chemical company has been falling faster than the rest of the market despite issuing bullish guidance on Oct. 26. The shares appear to have found support at $15 and may seem due for a bounce.

By purchasing in-the-money calls, the investor paid just 3 cents for the leveraging power of options. The contracts will appreciate dollar-for-dollar with Olin, so if the stock rises 20% to $19, the calls would be worth $6.50, a 97% gain. The strategy also reduces the amount of money lost if the stock doesn't move before expiration.

The trade pushed overall options activity in Olin to eight times greater than average, with calls outnumbering puts by 67 to 1.

-- Reported by David Russell of OptionMonster in New York.

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