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June 4, 2013  Tue 9:31 AM CT

MTL: SEE CHART GET CHAIN FIND STRATEGIES
Slowly but surely, one investor thinks the tide is turning for Russian steel maker Mechel.

optionMONSTER's monitoring programs detected the sale of 16,500 October 3 puts, most of which priced or $0.45. Volume was almost 8 times open interest at the strike.

The trader is now on the hook to buy shares for $3 if they close below that level on expiration, but the cost basis would be $2.55 including the credit received. That's slightly below its previous all-time low early 2009.

Selling puts is a common strategy when investors like a stock but don't want to shell out cash getting long. It lets them earn some money from the passage of time while programming a buy order at a lower price. (See our Education Section for more on how to manage entries and exits using options.)

MTL is up 1.67 percent to $3.04 in morning trading. It's lost more than 90 percent of its value since early 2011 amid worries about the Chinese economy and weakness in metals prices. But data in recent months has shown improvement in the global-growth story.

Today's put sale pushed total option in MTL to 24 times greater than average.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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