Traders are betting that Emulex will rally by early next year.
More than 2,500 January 7 calls traded in a strong buying pattern yesterday, mostly for $1.10, according to optionMONSTER's Heat Seeker real-time tracking system. The volume was twice as high as the strike's previous open interest, indicating that these are new positions.
ELX was down fractionally yesterday to close at $7.64. The networking-technology company gapped above its 200-day moving average with bullish option activity last Wednesday amid takeover speculation, and it has held at current levels since then.
The calls purchased yesterday, which lock in the price where traders can buy the stock, are looking for ELX to rally by mid-January but could expire worthless if the shares drop. Either way, these options will track the stock price closely because they are in the money . (See our Education section)
Total option volume in ELX yesterday was nearly 5 times its daily average for the last month. Calls outnumbered puts by more than 20 to 1, reflecting the session's bullish sentiment.
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