Is Nuance still a money machine?

By David Russell,

Shutterstock photo

Nuance Communications has been a money machine for option traders, and yesterday they wanted another payout.

optionMONSTER's Heat Seeker tracking system detected bullish call buying in the maker of speech-recognition software on June 4, with more than 3,000 October 18 calls purchased for $0.70. NUAN fetched $16.33 at the time, only to surge above $19 on a report that the company was exploring a possible sale. optionMONSTER subscribers more than tripled their money from the move.

Yesterday the call buying hit again. This time, some 8,800 July 21 calls crossed the Heat Seeker, eclipsing open interest of just 1,234 contracts. Most of them traded for the $0.45 ask price. More than 2,300 July 19s and July 20s were also purchased, but volume was below open interest in those.

These long calls lock in the price where the stock can be purchased, providing leverage to the underlying shares. But the contracts can quickly lose value if the stock stalls or pulls back. (See our Education section)

NUAN advanced another 2.51 percent to $19.23. It's been climbing against heavy short interest and enjoys backing from billionaire investor Carl Icahn. The stock is still down more than 30 percent from its all-time high above $31 in early 2012.

Overall option volume stood at 6 times average amounts by the closing bell yesterday. Calls accounted for a bullish 75 percent of the total.

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

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

This article appears in: Investing Options
Referenced Stocks: NUAN

More from optionMONSTER




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by