Tyco reached its highest level in 12 years yesterday, and one trader is positioning for even more gains.
optionMONSTER's Heat Seeker system detected the sale of 2,000 January 39 calls for the bid price of $1.70 and the purchase of 2,000 February 40 calls the ask price of $1.49 yesterday. Volume was below open interest in the nearer-term contracts, indicating that a long position in January was closed and rolled forward by a month to a higher strike.
The new long calls lock in the price where the stock can be purchased through mid-February no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $40. (See our Education section)
TYC rose 0.92 percent to $40.62 yesterday, its highest close since January 2002. Shares of the industrial conglomerate, whose products range from burglar alarms to sprinkler systems, are up about 40 percent this year and have doubled since September 2011.
Total option volume in Tyco reached 5,551 yesterday, nearly 7 times its daily average for the last month. Only 105 of those contracts are puts, a reflection of the session's bullish sentiment.
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