Silvercorp Call-Buyers Look for a Rally

By Pete Najarian, co-founder of OptionMonster

NEW YORK -- Silvercorp Metals ( SVM) has been churning, and now the bulls are looking for a rally over the next month.

OptionMonster's tracking systems show that the April 6 calls traded heavily in the silver miner on Friday as more than 3,000 changed hands for $1.30 and $1.35 against open interest of just 72 contracts. This means that new money was definitely being put to work on the long side.

The stock closed at $7.25, up 3.28%, so the calls were in the money. They lock in $6 as the entry price on the shares.

If Silvercorp rallies, these contracts will deliver some major leverage to the upside, but they can also lose value in a hurry if it falls. The April 7 calls also found a few buyers.

The company engages in the acquisition, exploration, development, and operation of silver mineral properties in China and Canada. It's been stuck between $6 and $10 since late August, and those call-buyers are betting that it's time for the stock to break out.

More than 8,700 options contracts traded on Friday versus its daily average of about 2,900. Calls outnumbered puts by 5 to 1.

Najarian has no positions in SVM.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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