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Traders Look for a Higher Level 3

Level 3 Communications has been enhancing its services, and traders are looking for the tech stock to rise a few levels.

The options have been getting active, and yesterday OptionMonster's tracking systemsshowed heavy buying at $1.50 strike prices. The March 1.50s, for instance, traded in large blocks for $0.10, $0.12, and $0.14. There was also big buying in the June 1.50s, though volume was below open interest in that one.

The company , which provides network and Internet services, has been wallowing around $1.50 and has developed a large short interest while competitors have outperformed it.

Last week, however, management said it's adding a new focus on storage-area networks to help enterprise customers meet increasing data-center connectivity requirements and manage costs. That could make Level 3 the newest member of the cloud-computing crowd.

The stock rallied early, paused, then ended the session strong to close up 7.28 percent at $1.40. It's still well off its 2010 highs around $1.80, but yesterday's option trades suggest that folks may be looking to test those levels.

Almost 24,000 contracts traded yesterday, compared with about 2,000 in a typical session. Calls accounted for more than two-thirds of the activity.

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Options Trading School:

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.

Najarian has no position in LVLT.

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