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Will Hologic see springtime rally?

By: optionMONSTER
Posted: 9/25/2013 1:10:00 PM
Referenced Stocks: HOLX

It's only September, but traders are already looking to next year for a rally in Hologic.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,000 March 22 calls for $1.20. Equal-sized blocks were sold at the same time in the March 18 puts for $0.85 and the March 25 calls for $0.35. Volume was more than 5 times open interest at all three strikes, indicating that new positions were initiated across the board.

The strategy combines elements of a vertical spread with short puts , letting the investor implement the trade for essentially nothing. He or she now stands to collect $3 if the medical-device stock closes at or above $25 on expiration. (See our Education section)

HOLX is off fractionally at $20.43 this afternoon but has been slowly working its way higher since the market bottomed in 2009. It leapt in July after naming a new CEO and then fell one month later. The shares have been building support above $20 for most of September.

It bottomed around $18.50 in both December and early July, which could make today's trader think that level will now be support. That would also help explain why they wrote puts at the 18 strike.

Total option volume is 17 times greater than average so far today, according to Heat Seeker, with that bullish three-way accounting for almost all the activity.