NEW YORK (
) -- Luxembourg-based steel and iron producer
did not announce any news today, but at least one investor is turning bearish on the company and expressing that bet with a big put purchase.
During midday trading, the investor bought 20,000 January 40 puts for 75 cents per contract. Assuming that this investor holds on to these puts until expiration next month, this purchase will be profitable if MT shares close lower than $39.25 when the options expire. But if the stock drops significantly before then, investors could choose to sell these puts to book profits.
These out-of-the-money 40-strike puts are home to current open interest of just 1,600 contracts, indicating investors traded these options to open. These puts gained 23 cents on the day and have an implied volatility of 40 compared to a 63-day realized volatility of 41.
MT shares were trading at $43.50 at the time of this put-buying action. The stock closed down 47 cents to $42.94. MT has seen its shares climb 150% since their March low of roughly $17. Furthermore, MT saw a new 52-week high yesterday (the stock topped out at $43.91 on Wednesday).
The theme of the day today is that the dollar is rallying on continued fear of troubles in Europe caused by Greece. That makes this type of put buying seem rational for people who believe the dollar may continue to rally, and the big run in the base material stocks could be coming to an end for the time being.
-- Written by Jud Pyle in Chicago
At the time of publication, Pyle did not have a position in the stock mentioned. Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."