Materials have lagged all year, but one option trader is betting that the sector will go from worst to first.
OptionMonster's monitoring programs detected unusual activity in the Materials Select Sector SPDR Fund yesterday, with some 14,000 June 42 calls bought for $0.20 and $0.21. Volume surpassed the strike's previous open interest of 9,730 contracts, indicating that new positions were initiated.
Calls lock in the price where shares can be purchased in the exchange-traded fund, whose big members include Monsanto and DuPont. Because they are relatively inexpensive, the options can generate significant leverage on a small move in the stock. For instance, those June 42s will return more than 800 percent if shares advance just 10 percent in the next 7-1/2 weeks.