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Arcelor Mittal

(MT) - Get Report

has rallied nearly 125% since its March lows, and we're seeing investors calling even more upside in the steel-and-iron manufacturer today.

Looking at the out-of-the-money Oct. 44 calls, nearly 15,000 of these options hit the tape during the first hour of trading today with the stock trading down 10 cents to $39.73 a share. These calls are home to current open interest of 151 contracts today, indicating that investors traded these options to open. MT shares are currently trading higher than $40.

These calls are currently trading up 25 cents on the day and have a delta of 25, meaning for every dollar move in the stock the calls should move by 25 cents. MT stock is currently down 32 cents, and the calls should have dropped roughly eight cents so far today. What does it mean if the calls are up and stock is heading lower? It means buyers are afoot and implied volatility is rising; it's now up to 50 from 43 at the close last night!

It's interesting to see significant call buying in MT without any news to catalyze this bullish activity. This could also be a stock replacement strategy, where the investor is selling shares, but buying the calls in case there is further upside. The call purchase could have less downside than owning the stock out right.

Call buying activity such as this does not mean investors should run out and buy up MT shares. But judging from the 35% rally in the stock throughout the last three months, at least one investor might think MT shares have more room to rally.

-- Written by Jud Pyle in Chicago

At the time of publication, Pyle did not hold any positions in the equity 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."