The bulls are charging into the SPDR Metals and Mining Fund for the third week in a row.
optionMONSTER's Heat Seeker tracking system detected the purchased of 10,000 May 28 calls in one print for $0.42 yesterday. This is clearly a new position, as open interest in the strike was 1,903 contracts before the trade occurred.
Traders began buying calls in this strike and in the May 29s early this month , and they came back last week to snap up the June 29s.
Long calls lock in the price where investors can buy a stock, which lets them position for a rally with limited capital. That can be safer than purchasing shares directly because only the cost of the options can be lost on a pullback. The calls can be sold anytime before they expire but will lose value if the stock falls. (See our Education section)
The XME rose 2.15 percent to $27.61 yesterday. The exchange-traded fund has drifted higher in a tight range since mid-March, following its 50-day moving average.
As noted in earlier articles, investors apparently hope that the fund will follow the lead of several steel makers, many of which have broken out of tight ranges. The fund's top four holdings are steel names, including Steel Dynamics, which yielded a profitable trade last week for subscribers of our InsideOptions Pro service.
Total option volume in the fund topped 18,200 yesterday, 12 times its daily average for the last month. Overall calls outnumbered puts by a bullish 9-to-1 ratio.
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