A trader in the know seems pretty sure that Mechel OAO (MTL) is not going any lower soon. The trader just sold 4450 Jan $2 puts, 99% of them sold at the bid. The proceeds from this opening put sale are approximately $178,000.
This is a rather unusual options play in a thinly traded foreign based corporation. We love these kinds of unusual, large options trades as it usually involves some kind of insider or analyst trading on yet to be released material facts. That’s right, insider trading. It happens all the time and if you’re lucky you can piggy back off these guys and profit (on a smaller scale too).
In this case given the low share price, it would be safer to buy and hold the common, rather than play options, and wait for the pop. And there will be a pop, likely much sooner than January 2015.
Mechel OAO is a Russia-based integrated mining and steel company. Given it’s Russian, where corruption reigns supreme, we like this option play even more! This appears to be one trade you have to copy.
In the past year, Mechel OAO (NYSE:MTL) has traded as low as $1.56, and at a 52 week high of $3.94. It is nowhere near profitability, but that doesn’t matter when someone hits up the options like this.
It is a little disconcerting that 10 analysts have a consensus rating of “SELL”, and a price target of $1.68, but really, analysts have no clue most of the time, so it’s not a big concern. These analysts expect Mechel OAO (NYSE:MTL) to lose 42 cents per share for the current quarter.
It’s a always a crap shoot with Russian companies but we think this option play is worthy of a small position in the common.