Fortinet buyers are back for more

David Russell (
December 27, 2013

Fortinet has bounced, and traders are looking for the gains to continue.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 5,000 January 19 calls for $0.70 and the sale of a similar number of January 21 calls for $0.15. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

Owning calls lock in the price where a stock can be bought, while writing them compels the investor to sell shares if they go over a certain level. Combining the two strategies is known as a vertical spread and lets the investor control a move between two levels.

In this case, the trader paid $0.55 and will collect $2 if the network-security company closes at or above $21 on expiration. That would be profit of 264 percent from a move of less than 15 percent in the underlying stock. (See our Education section)

FTNT slipped 0.11 percent to $18.88 yesterday. Its gapped lower in late November after its chief financial officer left, but call buyers stepped in on Dec. 2, and the shares have been rebounding since. The last earnings report in October was also strong.

Total option volume was 6 times greater than average in the session, with calls outnumbering puts by more than 80 to 1.

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