Unusual Options Activity: Vale (VALE)

Brazilian iron ore producer Vale (VALE) is down nearly 12 percent over the past year, far underperforming global markets. One trader sees the potential for a big move higher in the coming months.

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  • That’s based on the March 2024 $15 calls. With 157 days until expiration, 50,444 contracts traded compared to a prior open interest of 2,009, for a 25-fold rise in volume on the option. The buyer of the calls paid $0.44 to make the bullish bet.

    Shares recently traded for about $13, so the stock would need to rise $2, or over 15 percent, for the option to move in-the-money.

    Such a move could easily occur given the volatility in shares, and the strike price is still well under the stock’s 52-week high of $19.31.

    The iron ore producer has seen earnings slide 85 percent amid a slowing global economy, and revenues are down 13 percent. However, with inflation expectations lasting higher for longer, commodities should hold up well.

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  • Action to take: Investors may like shares here, near their 52-week low. The stock is prone to big rallies and drops, and is at oversold levels. At current prices, investors will also get a variable dividend, last calculated at 5.7 percent.

    For traders, the March calls look like a reasonable upside trade right now. They can likely deliver high double-digit returns on a rebound in shares, and could get to triple-digit returns under the right conditions.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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