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Bulls come back to Advance Auto Parts

David Russell (david.russell@optionmonster.com)

Advance Auto Parts started the month with a bang, and now the bulls are back.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 December 85 calls for $1.65 and the sale of an equal number of December 90 calls for $0.55. Volume was more than quadruple open interest at both strikes.

The trade cost $1.10 and will earn a maximum profit of 355 percent if the auto-parts retailer closes at or above $90 on expiration. (See our Education section for more on the strategy, which is known as a bullish call spread because is leverages a move between two specific prices.)

AAP trading at $81.14 this morning, up 0.43 percent on the day and 19 percent in the last week. Most of that move occurred on Nov. 1 after a report that management had hired Blackstone Advisory to explore a potential sale of the company to private-equity buyers. Before that news, the stock had lagged following two weak earnings reports.

Overall option volume in AAP is more than 7 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by more than 1,000 to 1.

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