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Bulls Turn to Materials on Pullback

Wednesday, 27 Feb 2013 | 7:52 AM ET

The recent market sell-off has brought materials stocks lower, and now they're gaining some attention.

OptionMonster's tracking systems yesterday detected unusual activity in the Material Select Sector SPDR Fund, which has fallen from near $40 to about $37.50. Traders focused on the April 40 calls, paying mostly $0.17 on more than 5,000 contracts.

Those options lock in the price where XLB stock can be bought, so they will generate some nice leverage if the fund rallies, but they will expire worthless if the shares don't move by mid-April.


The Material Select Sector SPDR Fund opened higher, stayed green all day, and closed higher by 1.07 percent at $37.75. The exchange-traded fund includes large holdings in companies such as Monsanto, DuPont, Dow Chemical, and Freeport-McMoRan Copper & Gold.

The fund's total option volume yesterday was more than triple its daily average for the last month. There were also some puts traded, but those appear to be closing positions.

—By CNBC Contributor Pete Najarian

Additional News: Cramer: Don't Get Distracted From Opportunity

Additional Views: Unusual Activity in This Casino Stock: Najarian

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com. Najarian owns XLB calls.

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