Teradyne drew heavy call buying for the second session in a row yesterday.
On Wednesday traders were targeting the October 22 strike as more than 11,600 calls were purchased, apparently by one major player. The bulls returned to the name yesterday, this time piling into a strike that was $1 lower.
optionMONSTER's Heat Seeker system shows that 20,000 October 21 calls traded for $0.55 to $0.75 in the session. The volume was far above that strike's previous open interest of 1,738 contracts, indicating that new positions were established.
These long calls lock in the price where the stock can be purchased through mid-October no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $21. (See our Education section)
TER rose 0.9 percent yesterday to close at $20.13. The technology-testing equipment company fell sharply after reporting quarterly results last month but has since erased all of those losses and is back near its 52-week highs of early April.
Total option volume in Teradyne topped 33,000 contracts yesterday, more than 20 times its daily average for the last month. Overall calls outnumbered puts by 5 to 1.
Disclosure: I own TER shares.
(A version of this post appeared on InsideOptions Pro yesterday.)
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