Bulls Are Mining Vale for Profits

By David Russell of OptionMonster

NEW YORK -- Industrial metals have been coming back to life, and bullish option traders charged into Brazilian miner Vale (VALE) at the end of last week.

OptionMonster's tracking systems show that 9,400 August 15 calls traded for 14 cents to 18 cents on Thursday in volume far above previous open interest of just 867 contracts. There was also heavy buying in the Weekly calls expiring this Friday, with 5,100 of the 14.50s going for 5 cents to 8 cents and 3,500 of the 13.50s for 38 cents to 58 cents, also all above open interest.

These long calls lock in the price where the stock can be purchased, providing potentially significant leverage to the underlying shares. But the contracts can quickly lose value if the stock stalls or pulls back.

Vale gained 2.41% to $14.03 on Thursday. The stock pulled back from its recent high of $15.59 in early April, bounced off support around $12.50 in mid-June, and shares have been grinding higher since. Investors are returning to metals and materials in response to strong economic data in the United States and China, according to OptionMonster's ResearchLab market-analysis tool.

Thursday's overall option volume in the name was more than double its full-session average, with calls making up a bullish 83% of the total.

Russell has no positions in VALE.

 

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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