What's behind call surge in Qlik

optionMONSTER

Qlik Technologies got crushed in October, and one big investor wants their money back.

optionMONSTER's Heat Seeker monitoring system detected the purchase of some 2,800 February 31 calls for about $1.50 and the sale of about 5,600 February 35s at the same time for $0.65. Volume surpassed previous open interest at each strike, indicating that a new ratio spread was initiated.

The trade cost just $0.20 and will expand to $4 if the software maker returns to $35 on expiration. Gains will erode above that level and turn to losses above $39 if the position was implemented in isolation.

The spread was likely done in conjunction with a long position in the stock. The investor probably owned QLIK before management erased one-fifth of the company's market value by issuing a weak outlook two months ago. This way, the investor can leverage a rebound to $35, earning huge leverage in the process and lowering the break-even price.

QLIK fell 0.15 percent to $26.47 yesterday. It's been trading on either side of $25 and is now back above its 50-day moving average for the first time since early October.

The stock also formed a " head and shoulders " reversal pattern around $35 before dropping, which is probably why the ratio spread is targeting that level.

Total option volume was quadruple the daily average , according to Heat Seeker. Calls outnumbered puts by a bullish 85-to-1 ratio.

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