Chicago Bridge Pullback Draws Buyers

By David Russell, reporter at OptionMonster

NEW YORK -- Chicago Bridge & Iron ( CBI) has been pulling back hard, but Tuesday the buyers stepped in.

OptionMonster's trade scanners detected unusual activity in the May 55 calls, with large blocks purchased for $1.40. More than 5,600 contracts changed hands, clearly new positions because open interest in the strike was just 734 before the session began.

These calls lock in the price where shares can be bought in the engineering company. Their cheap price can give them significant leverage, letting investors position for a rally at low cost.

The stock was down more than 1% when the calls hit but then rebounded and closed up 0.17% to $52.64. The calls appreciated some 10% to $1.55 from that small move.

Earnings come out May 2 and the last report beat on the top and bottom lines. The stock is down more than 15% since late March, so Tuesday's traders were apparently looking for a bounce heading into the next release.

Total option volume was twice the daily average in the session, with calls outnumbering puts by more than 5 to 1.

Russell has no positions in CBI.

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.

More from Options

Here's a Better Way to Hedge Using Stock Options

Here's a Better Way to Hedge Using Stock Options

Let the Najarian Brothers Crash-Proof Your Portfolio

Let the Najarian Brothers Crash-Proof Your Portfolio

Let the Najarian Brothers Help You Generate Income With Options

Let the Najarian Brothers Help You Generate Income With Options

Learn Options Trading from the Najarian Brothers, the Best in the Business

Learn Options Trading from the Najarian Brothers, the Best in the Business

All Investors Can Trade Options, Just Ask the Najarian Brothers WATCH VIDEO

All Investors Can Trade Options, Just Ask the Najarian Brothers WATCH VIDEO