Bulls target BMC Software at key level

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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 Education section)

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 researchLAB for more)

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 Heat Seeker.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: BMC

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