Why Traders Have Their Bets on McAfee
McAfee has been caught in a fairly tight trading range for much of the last two months, but options traders are betting that the computer security company will move significantly higher by mid-August.
Trading was concentrated yesterday at the August 45 strike, where more than 8,800 calls changed hands in a strong buying pattern, according to OptionMonster's tracking programs. The bulk of the volume, which was roughly eight times pen interest, came in blocks of 1,313 to 1,662 contracts for $0.65 to $0.75.
McAfee shares closed yesterday up 1.2 percent to $41.22. The stock had been climbing sharply since early March but leveled off around May 1 and has been trading mostly between $38 and $41 since then.
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For the calls purchased yesterday to turn a profit, McAfee shares would need to rise at least 11 percent by the time the contracts expire on Aug. 21.
Traders appear to be regaining confidence in the computer security company after some high-profile cyberattacks last week and a reduction of short interest in the overall technology sector in the last month. The company is scheduled to report second-quarter earnings on July 30.
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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.