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Bulls bet on Limited Brands comeback

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Limited Brands has been coming back after a rough holiday season, and traders are betting that the retailer's stock has more room to run.

More than 2,500 March 49 calls traded in a strong buying pattern on Friday afternoon, dominated by a block of 2,456 that went for $1.15, according to optionMONSTER's Heat Seeker tracking system. The volume was more than 19 times higher than the strike's open interest of just 130 contracts at the beginning of the day, clearly indicating that these are new positions.

Later in the day, a long-term trader opened a bullish three-way spread in the 2015 contracts that is looking for the stock to be above $52 by January of that year. That trade doesn't appear to be related to the earlier call buying.

LTD rose 1.24 percent on Friday to close at $48.28. The stock broke above its 200- and 50-day moving averages late last week and is now sitting just below its 100-day line.

The company, whose brands include Victoria's Secret and Bath & Body Works, hit a 52-week high of $52.50 on the first session of December but plummeted a month later after reporting disappointing holiday sales along with many other retail names. The stock then bounced sharply at the $44 level and has continued to climb since.

Friday's long calls , which lock in the price where traders can buy the stock no matter how high it might rise, are looking for LTD to gain roughly 4 percent or more by mid-March. These options could be sold at a profit earlier if their premiums rise with any rally before then, but they will expire worthless if the stock is below the $49 strike price at that time.

Total option volume in LTD was 12,605 contracts on Friday, about 10 times its daily average of 1,268 in the last month.

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