Market News

December 1, 2016  Thu 11:36 AM CT

Option activity in Dow Chemical may reflect confidence in the broader industrial rally, at least in the near term.

OptionMonster's tracking programs detected the sale of more than 6,400 December 54.50 puts for $0.45 to $0.69 today. Volume was more than 100 times the open interest in the strike, showing that this is new positioning.

Short puts lock in a price where investors must buy a stock, while letting them collect premium. Traders use the technique when they like a stock and think that the risk of a big drop is limited through expiration, which in this case will be in mid-December. (See our Education section)

Although the global corporation has many business lines, much of its operations involve applications such as architectural and industrial coating that will benefit from government-sponsored infrastructure programs anticipated under the Trump administration. Another major name in the space, LyondellBasell Industries, saw 6,300 December 85 calls bought mostly for $1.45 to $1.60 against open interest of 1,913 contracts on Nov. 10.

DOW is up about 1 percent to $56.26 in afternoon trading and has risen 4 percent in the last three months. The chemical manufacturer reported bullish results on Oct. 27 and is scheduled to announce its next quarterly numbers before the market opens on Jan. 26.

Its shares appear to be breaking through resistance that has been in place for most of the year. Chemical companies in general have been outperforming the S&P 500 of late, as seen in the screen shot below of our proprietary ResearchLab market scanner today:

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