Will CareFusion hit new highs?

By David Russell,

Shutterstock photo

The bulls piled into CareFusion yesterday, looking for the medical-equipment stock to hit record highs.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 3,600 October 40 calls, most of which priced for $0.45. Volume was more than 30 times previous open interest at the strike.

These long calls lock in the price where shares can be purchased, allowing investors to position for gains inexpensively while limited potential losses. But these contracts could expire worthless if shares remain below $40 through mid-October. (See our Education section for more on how to maximize gains and minimize risk with options.)

CFN rose 2.04 percent to $37.94 yesterday and is up 33 percent so far this year. The stock's all-time peak is $39.38, so yesterday's traders expect new highs in coming weeks.

Overall option volume was 17 times greater than average in the session, with calls accounting for a bullish 89 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)

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: CFN

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