How the bulls are playing Accuray

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Accuray has pulled back following a big rally, and the bulls are taking a shot on the long side.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 March 7.50 calls for $0.91. An equal number of March 5 puts was sold at the same time for $0.42, translating into a cost of $0.49.

The resulting position is highly leveraged to upside in the maker of surgical devices, controlling the equivalent of 192,000 shares for less than one-eighth the price. The leverage will ratchet higher if the stock moves, potentially controlling as many as 300,000 shares.

ARAY fell 0.74 percent to $6.71 on Friday. It surged about 25 percent between August and mid October following a strong earnings report, but has now surrendered almost all the gains. That could make some chart watchers it's now at an attractive entry point.

The investor is also on the hook to buy shares for $5 if they're below that level on expiration. He or she could be willing to do that because there are several likely support levels between $5 and $6.50. (See our Education section for more on buying calls and selling puts .)

Total option volume was 11.5 times greater than average in the session, according to Heat Seeker. The next earnings report is scheduled for Thursday, Nov. 7, after the closing bell.



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: ARAY

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