Options Trading News

February 21, 2013  Thu 3:47 AM CT

Someone apparently thinks that ArcelorMittal is going nowhere in a hurry.

optionMONSTER's tracking programs detected the sale of 13,000 September 18 calls for $0.74. An equal number of June 18 calls was bought at the same time for $0.41, but volume was below open interest at that strike. This suggests that an existing short position was closed and rolled forward in time.

The investor probably owns shares in the European steel maker and has been writing calls to earn income. The strategy obliges him or her to sell their shares for $18 if they go above that level, and yesterday's adjustment prolonged that commitment by three months. In return, the trader collected an additional $0.33 of income. (See our Education section)

It's also possible that both halves of the trade are opening positions, in which case the strategy is a short calendar spread. Regardless, the activity reflects a belief that MT will remain below $18 well into the second half. That could make sense because it's where the stock double-topped last month.

MT declined 4.91 percent to $15.68 yesterday. Shares have gone nowhere since August, despite the S&P rallying almost 7 percent in that time.

The trade pushed total option volume to 12 times greater than average in the session.
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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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