Bulls salute Flagstar at 6-month high

optionMONSTER

Flagstar Bancorp hit a six-month high on Friday, and traders are betting that it has more room to run.

More than 2,900 October 17.50 calls traded in a strong buying pattern on Friday for $0.50 to $0.80, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest of 830 contracts, indicating that new positions were initiated.

These long calls lock in a $17.50 purchase price for the stock through mid-October no matter how far it might rise. They could be sold earlier at a profit if their premiums gain with a rally in FBC before then, but the contracts will expire worthless if shares remain below that level. (See our Education section)

FBC jumped 6.6 percent to $16.96, its highest close since Jan. 23. The Michigan-based regional bank, which reported second-quarter earnings last Tuesday, was upgraded to "neutral" from "sell" by Compass Point on Friday.

The call buying made up almost all of Flagstar's total option volume in the session, which was 19 times its daily average for the last month. Overall calls outnumbered puts by a bullish 39-to-1 ratio.  

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