By Pete Najarian of OptionMonster
NEW YORK -- Vale ( VALE) is engaged in the production of ferrous metals, but Monday it was producing huge profits for option traders.
OptionMonster's tracking systems showed heavy buying Monday in the November 17 calls, which went for 12 cents and 13 cents. More than 11,000 traded early for those prices, well above the previous open interest of 2,526 contracts and therefore indicating fresh activity.
Calls lock in the price where shares can be purchased, giving them cheap and potentially explosive leverage to a rally. And that's exactly what happened Monday in Vale, which saw those calls shoot up to 26 cents -- a profit of 100% in a matter of hours.
Vale shares ended the session up 4.58% at $16.22. Its business lines include iron, manganese, copper, and coal. Management has been reportedly engaged in a strategy of selling off non-core assets and expanding in key iron-ore markets. Others in the space have been pushing hard in recent weeks.
More than 15,000 of those November 17s would trade by the end of the session. Volumes were more even more impressive in Vale overall, with 68,000 contracts trading in total. Puts numbered just 23,000, a reflection of the day's bullish bias.
Najarian has no positions in VALE.