BMC Software has pulled back to long-term support, and the bulls
are stepping in.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 1,000 February 34 calls for $1.87 and the sale of an
equal number of February 37 calls for $0.80. Volume was more than 6
times open interest in both strikes.
The trade resulted in a cost of $1.07 and will earn a maximum
profit of 180 percent if the stock closes at or above $37 on
expiration. It's known as a
bullish call spread
because premium from selling the higher strikes is used to reduce
the cost of the contracts that are
closer to the money
. (See our
BMC rose 0.69 percent to $33.56 yesterday but has lost more than
one-third of its value in the last six months. The software stock
had a big run between September 2010 and July 2011 but fell hard
after issuing two mediocre financial reports in a row. (See
In the last month, however, BMC has been holding its ground around
the same $33 level that has been a key consolidation area several
times in the last five years. It also marked a peak back in 2001 as
the tech bubble was collapsing, which could be leading some chart
watchers to expect a bounce.
Overall option volume in the name was triple the daily average,
with calls outnumbering puts by more than 80 to 1, according to the
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