Bullish Options Traders Are Targeting Nucor, Other Steelmakers
NEW YORK -- Bullish option traders targeted Nucor (NUE) - Get Report on Tuesday for the second time in the last week as steel makers attempt to rebound.
More than 5,200 March 48 calls were purchased for 23 cents to 44 cents on Tuesday, according to OptionMonster's Heat Seeker tracking system. Volume was more than twice the previous open interest in the strike, indicating that this is fresh buying.
Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall, and these contracts can provide significant leverage if shares move higher. For example, calls that were bought in the March 47 strike a week ago have doubled from just a small gain in the share price.
Nucor rose 0.23% to $47.41 on Tuesday and is trying to find support above its 50-day moving average. While the strong U.S. dollar and weak global growth have combined to hammer metals, stimulus measures from Europe to China have improved sentiment toward the industry more recently.
Tuesday's total option volume in Nucor was almost twice its daily average for the last month. Overall calls outpaced puts by more than 3 to 1.
The action was among several bullish trades in steel producers Tuesday. The Heat Seeker also detected heavy call buying in U.S. Steel's (X) - Get Report March 22, March 22.50, and October 22 strikes. Steel Dynamics (STLD) - Get Report saw bullish activity recently in its April 19 calls, which doubled in value by Tuesday's closing bell.
-- Written by Mike Yamamoto of OptionMonster
Yamamoto has no positions in any of the stocks mentioned.
