China's decision to allow for more flexibility in the yuan's exchange rate had traders snapping up new contracts for energy and material companies, which are tied to the worldwide economy and seen benefitting from heightened spending.

A strong Chinese yuan would mean an increase to the country's purchasing power, which ameliorated concern that China would clamp down on spending. Materials companies, which deal with aluminum, steel and other minerals such as gold and copper, as well as energy companies were among the best-performing stocks. Activity also jumped on the options side, which normally get little attention from traders.

AK Steel Holding Corp. saw new calls that expire in August, including contracts at the $15, $16, and $18 strike price. Volume ranged between 200 and 300 contracts, where there previously was no open interest. A call contract allows the holder to buy the stock at the designated strike price by the expiration date.

Conversely, traders bought August $13 and $14 puts, which give the holder the right to sell the stock.

AK Steel recently traded at $14.47.

Likewise, U.S. Steel Corp. saw new contracts snapped up for the August expiration date, with more than 800 $46 calls and 750 $50 calls changing hands, vs. 720 $46 puts and more than 400 $45 puts. Shares recently traded at $45.63.

The movement towards August contracts was sparked by China's move, but also traders looking to roll over bets to the next month, said Michael Schwartz, chief options strategist for Oppenheimer. With the June contracts expiring, July now becomes the "front month," a futures term that signals the most immediate month. Traders looking for more time will buy contracts for the following month.

"They could be rolling over to buy some more time for a scenario that they've previously committed to," Schwartz said.

Traders were looking farther out with Freeport-McMoran Copper & Gold Inc. Nearly 5,400 November $70 calls traded, compared with open interest of 2,000. Nearer term, traders also snapped up nearly 5,000 July $70 puts, or more than double its open interest. Shares traded at $68.47.

Credit Suisse analyst Andrew Garthwaite said the metals and mining sector outperformed by 31% in the six months after the last time the yuan appreciated.

Energy companies were also seen benefitting. Massey Energy Co. saw more than 600 August $33 calls change hands, when there was previously no open interest. More than 300 August $36 calls were also purchased. Massey shares changed hands at $32.29.

Patriot Coal Corp. also saw activity with contracts for the August expiration period, with more than 200 $18 calls, 120 $19 calls and $120 $20 calls snapped up. Previously, there was no open interest on any of those contracts. Patriot Coal recently traded at $16.35.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com
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