Bulls Think Nothing Can Stop Steel Dynamics

By David Russell of OptionMonster

NEW YORK -- Steel Dynamics ( STLD) has been ripping, and the bulls think it will keep running into early 2015. 

OptionMonster's tracking systems detected the purchase of about 1,400 February 24 calls for 50 cents and 2,100 February 22 calls for $1.25 and $1.30. Volume exceeded open interest at both strikes, which indicates new money was put to work on the long side.

Calls lock in the price where investors can buy a stock, allowing them to control a rally with limited cost. They can also generate significant leverage if shares move in the right direction. 

Steel Dynamics rose 0.33% to $21.51 on Wednesday, and is up 17% in the last month. Most of that move came after quarterly revenue beat expectations and the company bought domestic steel plants from Russia's Severstal in late July. It's also back above its 2011 high, so Wednesday's trader was looking for the stock to retrace its big drop in 2008.

It was additionally noteworthy that he or she calls at two strikes. They can later sell more contracts in the middle if they want to create a so-called butterfly spread.

Total option volume was twice the daily average in the session, with calls outnumbering puts by 73 to 1.

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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