Bet on rally in Brazilian ore play in next month.
The October 4th $12.50 call options in Vale (VALE) saw heavy trading recently. With shares around $11.80, the option is a bet on shares moving another 6 percent higher in the next 22 trading days before expiration.
Over 3,750 contracts on this option traded against a prior open position of 100, making for a 37-fold surge in volume on the trade.
- Same Stock… Same Date… Every Year?
Have you ever wondered how Wall Street makes money… EVERY DAY?
Now you don’t have to… These “Primetime Stocks” skyrocket every year... On the SAME date!
One of them has already seen gains like 230%, 248%, and even 350% in the past few years...
With a cost of just $0.16, or $16 per contract, it’s an inexpensive bet that could give the trader a lopsided return if shares move even higher. If Vale shares hit $13 at expiration, the option could be worth $0.50, or more than three times the current cost. It’s a bit of a risk, however, as Vale is a Brazilian company with operations in the iron ore production market.
Action to take: Vale is an interesting commodity play, and a nice long-term bet on both Brazil and the attractive iron ore space.
Shares of Vale have certainly traded higher in the past year—as high as $16. But with such a short term before the option expiration, this trade looks heavier on the potential risk than the reward.
Speculators should consider a January 2020 option instead to give themselves more time for a rally to play out—and investors should look for a chance to buy under $11.50 per share.