Nuance draws bullish trade after pullback

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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.




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: NUAN

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