Sky-Mobi has broken out, and the bulls are giving chase.
optionMONSTER's Heat Seeker monitoring program detected the purchase of about 3,000 July 10 calls, most of which priced for $0.20 to $0.35. Volume was more than quadruple the previous open interest in the strike, which indicates that new money was put to work.
Long calls lock in the price where the Chinese mobile-gaming stock can be purchased, letting investors cheaply position for a rally. They can also generate significant leverage if shares move in the right direction, but the contracts will expire worthless in mid-July if shares remain below $10. (See our Education section)
MOBI rose 13.81 percent to $8.16 yesterday after profitably selling a stake in a Chinese game developer. The highly volatile small-cap stock surged more than 600 percent between April 2013 and March 2014, then rolled over before finding support at its 100-day moving average last month. It traded in a tight range before breaking out yesterday.
Overall option volume was 15 times greater than average in the session, according to the Heat Seeker. Calls accounted for a bullish 94 percent of the total.
Disclosure: I own MOBI shares.
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