Bullish traders were piling into Smith International yesterday, apparently betting that the oil services company will break through resistance levels that have been in place for months.
Smith International finished the regular session yesterday up 5.83 percent to $29.79 and rose to $30.28 in after-hours trading. The shares have not closed above $30 since June 12, having tested that level and pulled back a month ago.
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Options activity blew away the average volume of 1,000 calls per day, showing more than 27,400 traded by the end of the session on OptionMonster's proprietary tracking systems. About 22,000 of those calls changed hands at the November 32 strike, most of them bought at the asking prices between $1.20 and $1.60.
There was ZERO open interest at the strike because these options just came online Monday following Friday's expiration, so this is fresh buying with conviction. The stock needs to rise more than 12 percent by late November for these calls to turn a profit.
Total calls at all strikes outnumbered puts by more than 6 to 1, another bullish indication.
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Najarian owns a call spread in SII.
Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.