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Rite Aid calls betting on breakout

Rite Aid is breaking out to new highs, and the bulls are betting that it will keep going.

optionMONSTER's Heat Seeker monitoring program shows that upside calls outnumber downside puts in the pharmacy chain by almost 12 to 1 today. The activity is spread across various expirations ranging from next week through October. Most were purchased, though in many cases it's not clear that new money was put to work because volume was below previous open interest.

By snapping up those calls , investors have locked in the price where they can buy stock. That ensures they won't miss further upside and can generate significant leverage if a rally takes place. (See our Education section)

RAD is up 3.62 percent to $8.88 in afternoon trading after touching a 13-year high of $9.07 earlier in the session. The stock ran more than 700 percent between late 2012 and last June as management successfully turned around its business. Sales growth has continued to impress this year, and investors have speculated that it might be acquired by a larger rival such as Walgreens Boots.

Earnings are due next Wednesday, April 8, before the opening bell. The Heat Seeker also showed heavy volume in some April calls two weeks ago that have now doubled in value.

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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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