Why These 3 Stocks With High Call Option Volume Deserve Attention

Key Points

• Call option traders decided to invest in these three stocks, all backed by fundamental tailwinds that justified such actions and their upside potential.
• Wall Street analysts think these names have double-digit upside potential, as shown in price targets.
• It looks like the broader thesis for the global economy is aligned to greatly benefit the stocks in this list.

When investors want to profit from a company’s stock swing, they typically only think of buying the underlying shares of stock and then hoping for their optimistic thesis to be proven right in the form of higher prices so that they can sell their shares at a profit and walk away a winner. There is, however, another way that traders often profit from their views on a stock, which is by utilizing leverage through another financial product.

These products are called stock options, and they not only provide the trader (buyer) leverage on the underlying stock’s position but also come at a cost. The cost of leverage comes through the timing exactitude needed to profit, meaning that these options will expire worthless unless the trader gets not only the direction but also the timing of the trade right. Knowing this, investors can assume traders are more convinced about a stock’s move when they buy these options.

In today’s list of unusual call option volume, the underlying view is that these stocks will not only see higher prices but also get there sooner rather than later. This is why investors should keep track of shares of 3M NYSE: MMM and Vale NYSE: VALE as part of the basic materials sector and also of Exxon Mobil Co. NYSE: XOM for exposure to the upside in the energy sector.

Why 3M Deserves Investor Attention

While many defensive stocks have underperformed over the past 12 months, as the stock market’s attention has been centered around a few names in the technology sector, shares of 3M have proven to investors that the market has not forgotten about this domestic manufacturing leader.

Inside the manufacturing PMI index, investors can notice a sudden expansion in the chemical and miscellaneous manufacturing industries, showing the market where the new business activity—and profits—might end up. Of course, this has favored shares of 3M, considering that they now trade at 98% of their 52-week high price.

Taking this bullish price action as an indication of optimism in 3M for the coming months, investors can then build on their optimistic thesis by looking into some of Wall Street’s gauges for the company. Bank of America decided to reiterate its buy rating for 3M stock as of January 2025 and, this time, placed a $175 price target on it as well.

To prove this new view right, the stock would have to rally by as much as 16.6% from where it trades today, not to mention a new 52-week high to push momentum traders into the stock further. This is why up to 68,674 call option contracts were traded compared to the average of 15,449.

International Trade Favors Vale Stock

Now that this Brazilian iron maker has traded down to 61% of its 52-week high, the risk-to-reward in this name has gotten too good to ignore in today’s market. These traders have started to take advantage of it. With the new manufacturing expansion in China, Asia’s powerhouse economy, demand for iron ore and oil might soon spike.

Because of this potential tailwind in Vale stock’s back, up to 99,798 call options were traded to give investors the bullish gauge to assume the future looks bright for this iron ore producer. A significant boost of 137% from the average volume of 42,096 calls for a rally in Vale stock, which will be coming sooner rather than later.

This view would also explain the new overweight rating placed on the stock by Barclays analysts as of December 2024, when they decided to place a price target of up to $15.25 a share. This new valuation would imply that Vale stock needs to rally by as much as 71.3% from where it trades today.

Energy Stocks to Drag Exxon Mobil Higher

After the Goldman Sachs macro 2025 outlook report was released, the broader market realized that oil carries the most upside potential out of all the commodity markets. Even Paul Tudor Jones agreed on this after a recent CNBC interview.

Even Warren Buffett has taken this view by buying up to 29% of Occidental Petroleum Co. NYSE: OXY in recent quarters. Exxon Mobil, however, has upside potential from its exposure to international oil demand, a theme that closely tracks the Vale proposition with China’s economy coming back online.

This is where the 87% of its 52-week high comes into play to show investors bullish momentum in recent days. More than that, these analysts from the UBS Group have decided to reiterate their buy rating on the company as of December 2024, right along a price target of $147 a share, calling for up to 33.6% upside from where it trades today.