Is Symantec Ready to Break Out?
Symantec has been parked at long-term resistance, and now the bulls are looking for a breakout.
OptionMonster's tracking systems detected the purchase of 8,350 April 25 calls on Friday in volume that was 14 times higher than the strike's previous open interest of just 600 contracts, clearly showing that this is fresh buying. Most of those options were priced for $0.17 to $0.21.
Calls lock in the price where investors can buy shares, so they have the potential to generate significant leverage in the event of a rally. But they will expire worthless if the stock doesn't move or declines.
The strategy seems to make sense in the case of Symantec, which has been sitting at $22 for the last week. That level marks a top for the security-software stock in September 2008, so traders may believe that it will face strong overhead resistance there.
Owning calls limits risk to a tiny fraction of the share price, giving them a taste of the profits if the stock explodes higher while limiting the pain if it drops.
Symantec shares fell 0.62 percent to $22.53 on Friday, but is up more than 27 percent in the last six months. That's more than 20 times the performance of the technology-laded Nasdaq 100 index over the same period.
Total option volume was almost triple the daily average, with calls outnumbering puts by a bullish 15-to-1 ratio.
—By CNBC Contributor David Russell
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in SYMC.