OptionsHouse

Options Trading News

March 8, 2013  Fri 2:45 AM CT

STLD: SEE CHART GET CHAIN FIND STRATEGIES
One big investor apparently believes that Steel Dynamics may be ready for a pullback.

optionMONSTER's Depth Charge monitoring program detected the purchase of 5,000 August 14 puts for about $0.83 and the sale of an equal number of August 18 calls for $0.40. Volume was more than 13 times open interest at each strike, clearly showing that this is new activity.

He or she probably owns shares in the steel maker, which is up 21 percent in the last three months. Buying the puts protects against a drop, while writing the calls reduced the price of that insurance. It also forces the trader to sell the stock for $18 if it closes above that level on expiration in mid-August.

Including the net cost of $0.43, the minimum exit price will be $13.57 and the maximum will be $18.43. (For more on this strategy, known as a collar, click here.)

STLD rose 0.26 percent to $15.49 yesterday and is hovering around a level where it peaked early last year. That could be leading some chart watchers to think that it's at resistance and poised for a drop.

The collar pushed total option volume to 11.5 times greater than average in the session, according to the Depth Charge.

Share this article with your friends


Related Stories

STLD

Buyers return to Steel Dynamics

March 13, 2015

The steel-products manufacturer has fallen sharply since last Thanksgiving as the soaring U.S. dollar has hurt metals and mining companies.

STLD

Cautious buyers target steel makers

March 11, 2015

Steel producers have gotten hammered for months, but today traders are beginning to turn bullish on various names in the industry.

OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Short Gamma

Last week, we talked about long Gamma. We said that long gamma is acquired by purchasing options and when you...

View more education articles »