NEW YORK -- Steel makers have been strong recently, and option traders are piling into Steel Dynamics (STLD) - Get Report ahead of its earnings report next week. 

OptionMonster's Heat Seeker system showed that almost 4,300 May 22 calls were bought for 42 cents to 45 cents on Tuesday. That was well above the strike's previous open interest of 524 contracts, an indication new money was at work. 

These long calls lock in the price where the stock can be purchased through mid-May no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $22. 

STLD rose 2.29% to $21 on Tuesday. The stock closed above its 200-day moving average for the first time this year, having hit resistance at that level three weeks ago. Quarterly results are due after the closing bell on Monday, April 20. 

Overall option volume in the name reached 8,600 Tuesday, more than five times greater than its daily average for the last month. Total calls outnumbered puts by a bullish 10-to-1 ratio.

 -- Written by David Russell of  OptionMonster

Russell has no positions in any of the stocks mentioned