Check Out This Bullish Options Activity in Giant Semiconductor and Mining Stocks

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The two largest companies in their industries had bullish options activity today: Intel and Vale.

Intel (INTC), the world’s biggest semiconductor maker, saw heavy call buying shortly after the opening bell. Traders initially purchased the 25-June 62 calls for $0.10 to $0.20. They next targeted the 25-June 60s, with the largest blocks pricing for $0.33.

Calls fix the price where investors can buy a stock. They can appreciate rapidly if shares rally because of their low upfront cost, however they can also expire worthless if the company doesn’t move up in value.

INTC slid 0.34 percent to $57.99. Tuesday’s activity was interesting because it targets a short-term move by the end of next week. It’s also looking for a push $60, which has been resistance since management issued weak guidance on April 22.

More than 135,000 contracts traded in the 60 and 62s, lifting INTC’s daily overall call volume to the highest since January.

Intel (INTC), daily chart, showing bearish price gap and daily call volume.

Vale’s Bullish Call Roll

The activity in Brazilian mining giant Vale (VALE) was potentially more bullish because the investor rolled a position in hope of bigger gains:

  • He or she sold about 15,000 July 23 calls for $0.47 and $0.48.
  • At the exact same time, they purchased 25,500 July 24 calls for $0.25.
  • A credit of $75,000 was collected from the transaction.

Volume was below open interest in the 23s but not the 24s, which suggests an existing trade was exited at the lower strike and rolled up. More importantly, the bigger number of contracts will increase their leverage in the event of a large rally. For example, if the iron-ore company closes at $28 on expiration, the new position will be worth $10.2 million while the old position would be worth $7.5 million. However, owning the higher strike also increases their risk of the contracts expiring worthless.

VALE ended the session down 1.73 percent to $22.14. Overall options volume was about twice the monthly average, with calls accounting for 71 percent of the activity.

Vale (VALE), daily chart, with key technical patterns marked.
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