This Trade Targets a 100% Return in About 3 Months

Option Trade of the Day: Arcelor Mittal (MT)

For the second straight day we saw stocks open higher and give way to selling before we even reached the lunch hour. Once again the indices closed near their lows of the day and that is a concern. This is the third straight day of losses after the big gains on Friday. Nine of the ten main sectors moved lower yesterday with the utilities sector being the only one in the green.

[hana-code-insert name=’adsense-article’ /]On the down side, the materials sector had the worst performance.

While the scans produced far more bearish signals than bullish signals once again, 101 to five, I was a little concerned about giving you six bearish trade ideas and only one neutral one in the last seven ideas.

Therefore, I have a bullish trade idea for you today.

Arcelor Mittal (NYSE: MT) was on the bullish list, and the Luxembourg-based steel manufacturer’s chart caught my eye last night.

The trend channel jumped out at me right away, even before I had drawn it. The fact that steel companies have been in the news didn’t hurt either.

From a fundamental perspective, MT has performed well recently. The EPS grew by 159% in the most recent quarter while sales jumped 25%. The company boasts an ROE of 13.3%, a profit margin of 6.6% and an operating margin of 7.7%.

Buy to open the June18 31 strike calls on MT at $3.25 or better. These options expire on June 15. The recent high for MT was just above the $37.50 level and I look for the stock to return to that level. Getting to $37.50 would make these options worth $6.50 and would make the return 100%. Going out to the June expiration gives the trade more time to work out too. I would use a move below the $32 level as a stop-loss point.

— Rick Pendergraft

OPTIONS DISCLAIMER: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation,

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Rick Pendergraft, Trades Of The Day

Rick Pendergraft has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick's analysis process includes fundamental, sentiment and technical analysis.