Calls lock in the price where investors can buy a stock, allowing them to control a rally with limited cost. They can also generate significant leverage if shares move in the right direction.
Steel Dynamics rose 0.33% to $21.51 on Wednesday, and is up 17% in the last month. Most of that move came after quarterly revenue beat expectations and the company bought domestic steel plants from Russia's Severstal in late July. It's also back above its 2011 high, so Wednesday's trader was looking for the stock to retrace its big drop in 2008.
It was additionally noteworthy that he or she calls at two strikes. They can later sell more contracts in the middle if they want to create a so-called butterfly spread.
Total option volume was twice the daily average in the session, with calls outnumbering puts by 73 to 1.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV