Options Trading News

April 25, 2013  Thu 4:47 AM CT

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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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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