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What Options are Saying About This Steel Company

Thursday, 3 Dec 2009 | 7:54 AM ET

Upside option activity in Gerdau lit up our screens as the Brazilian steel company prepared to make a presentation today at the Goldman Sachs 5th Annual Global Steel Forum.

Traders were focused on the January 17.50 calls, where 8,251 contracts were bought for $0.85 and $0.90, according to OptionMonster's real-time tracking systems. That volume was well over the open interest of 3,319 contracts and dwarfed the average turnover of just 33 calls per day at that strike.

Overall calls at all strikes totaled 9,813 compared with a grand total of 40 puts traded in the name yesterday, a further bullish indication. Gerdau is the world's second-largest maker of long steel, and infrastructure growth is surging in Brazil.

Gerdau closed yesterday at $17.02, up 2.47 percent on the session. The stock has been in a mostly steady uptend since its 52-week low of $4.63 in early March, though it has recently hit resistance around $17 and may be ready for another leg up.

The stock would need to rise roughly 8 percent or more by expiration for the January 17.50 calls to turn a profit.

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Gerdau Competes With:

Companhia Siderurgica Nacional

Arcelor Mittal

United States Steel

Nucor

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Options Trading School:

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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.

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Disclaimer

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