Fortinet bulls expect good earnings

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The bulls are looking for fireworks when Fortinet reports earnings later today.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 15,000 November 27 calls for $0.74 and the sale of an equal number of November 29 calls for $0.25. Volume was more than 25 times the previous open interest in each strike, which indicates new money was put to work.

Owning calls locks in the price where an investor can buy a stock, while selling them generates income but creates the obligation to deliver shares at a certain level. Combining the two is known as a vertical spread , which lets them make money from a specific move between the two strike prices. (See our Education section)

In the case of yesterday's spread, the trader will collect $2 if the stock closes at $29 or higher on expiration. He or she is also limiting risk against a bad headline because the most that can be lost is the $0.40 paid to place the bet.

FTNT rose 0.84 percent to $25.27 yesterday. The network-security company reached a 52-week high of $26.84 last month, pulled back along with the broader market, and has since rebounded to the middle of its range. The call spread is looking for a breakout to new highs.

The last four reports have beaten expectations on the top and bottom lines.

Total option volume was 58 times greater than average in the session, with calls outnumbering puts by more than 200 to 1.

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 Symbols: FTNT

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