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Advance Auto Parts draws bulls

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are looking for Advance Auto Parts to accelerate in the next month.

More than 2,300 October 85 calls were purchased for $0.40 and $0.50 on Friday, according to optionMONSTER's proprietary Heat Seeker system. The volume was far above the strike's previous open interest of 474 contracts, indicating that this is fresh buying.

These long calls lock in the price where traders can buy the stock through mid-October no matter how far it might rise. They could be sold earlier at a profit if premiums gain with a rally before then, but the contracts will expire worthless if share remain below the $85 strike price. (See our Education section)

AAP was down fractionally at $80.65 on Friday. The auto-parts retailer had been trending lower since reporting second-quarter results on Aug. 8 but held support at its 200-day moving average and has been climbing in the last week.

Total option interest in AAP on Friday was more than 8 times its daily average for the last month. Calls outnumbered puts by a bullish 18-to-1 ratio.

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