(The following is an example of notable trading cited on optionMONSTER's InsideOptions Pro service yesterday.)
Bullish option traders piled into ADT yesterday as it pulled back from a recent sprint higher.
optionMONSTER's Heat Seeker tracking system detected the heavy buying in the March 39 calls, initially for $0.80 but then for as much as $1 as the security-alarm stock pushed higher. Almost 6,700 contracts changed hands in the strike overall, almost 10 times previous open interest, showing that new money was put to work.
Long calls lock in the price where investors can buy stock, which allows them to profit from a rally at limited cost and therefore with less risk. These options can also generate huge leverage on a percentage basis but will lose value if shares fall. (See our Education section)
ADT was up 1.8 percent to $39.03 yesterday and has risen 12 percent in the last three months. It fell violently in January 2014 on a weak earnings report but has been fighting back on strong quarterly results since.
Total option volume in the name was 6 times greater than average yesterday, with calls outnumbering puts by a bullish 51-to-1 ratio.
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