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April 25, 2013  Thu 4:47 AM CT

LYB: SEE CHART GET CHAIN FIND STRATEGIES
LyondellBasell Industries reports quarterly results tomorrow morning, and the bulls are looking for a rally.

optionMONSTER's Heat Seeker monitoring program detected the purchase of some 12,400 May 65 calls yesterday in volume far above the previous open interest of 2,031 contracts. Early blocks priced for $0.40, but premiums rose to $0.70 by the afternoon as the shares nudged higher.

These long calls lock in the price where the Dutch chemical maker can be purchased, providing investors with upside exposure at a fraction of the cost. Their cheap price could also provide gigantic leverage in a rally. For instance, a 16 percent gain in the shares would inflate the options by about 1,000 percent.

LYB rose 1.67 percent to $60.33 yesterday and is up 37 percent so far this year. It peaked around $65 in March, so yesterday's call buyer may want to make sure he or she doesn't miss a breakout above that level. (See our Education section for more on how options can be used to manage trades.)

Some 16,500 contracts changed hands in the session overall, almost 6 times more than its normal daily turnover. Calls outnumbered puts by a bullish 24-to-1 ratio.
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Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

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