Nuance Communications has had a big pullback, and one trader
apparently thinks that it will continue higher.
optionMONSTER's Heat Seeker tracking system detected the purchase
of 7,798 January 25 calls for $0.55 and the sale of an equal number
of April 20 calls for an average premium of $0.275. The trade
resulted in a net cost of $0.275.
Volume was below open interest in the April contracts but not in
January, suggesting that a position was closed in the former and
rolled to the latter. That gave the investor an additional nine
months to profit from a rally in the software company.
NUAN fell 1.44 percent on Friday and has lost 12 percent of its
value in the last month. The shares have been trending steadily
higher since November 2008 but have pulled back to the same $18
level where they peaked last spring.
The company's products are used for voice-recognition and
computerized speech. Its business has been riding a boom in
smartphone usage, although management issued a weak forecast on
Feb. 9 as competition increased and the enterprise market slowed.
Friday's trade pushed total option volume in NUAN to 12 times
greater than average, with calls accounting for a bullish 99
percent of the activity.
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