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Summertime Rally for Rockwood?

By Mike Yamamoto of OptionMonster
 
NEW YORK -- At least one trader is looking for Rockwood (ROC) to rally by mid-summer.
 
OptionMonster's tracking systems detected the purchase of more than 3,000 August 72.50 calls for $4.50 Monday. This is fresh buying, as there was no open interest in the strike before the trade appeared.
 
Such long calls lock in the price where a stock can be bought, letting investors cheaply position for a rally. That can provide significant leverage while limiting the amount of capital at risk, but the options will expire worthless if they stall or decline.
 
Rockwood shares fell 4.32% to $71.02 Monday. The chemical company, which provides lithium used in batteries and other products, has been pulling back since reaching an all-time high of $82 the day after its last earnings report on March 3. The stock appeared to be finding technical support before it got hammered in the broader market's recent selloff.

Overall option volume in Rockwood Monday was triple its daily average for the last month. Calls accounted for more than two-thirds of the total.
 
Yamamoto has no positions in ROC.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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