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Bulls not playing games with Mattel

David Russell (david.russell@optionmonster.com)

Mattel has been rallying for the last three weeks, and traders think the stock isn't playing around.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 November 45 calls, most of which priced for $0.73. Volume was more than 5 times open interest at the strike, indicating that new money was put to work on the long side.

These long calls lock in the price where the toy maker can be bought, letting investors cheaply position for a rally. They can also generate some nice leverage, which is exactly what's happening today. (See our Education section)

MAT rose 1.92 percent to $45.67 in afternoon trading. But that gain is nothing compared with the percentage increase of the November 45s, which quickly shot up to over $1.

The company reported better-than-expected earnings and revenue on Oct. 16 amid strong demand for its American Girl and Monster High dolls. The stock is now back to its highest level since mid-2007.

Total option volume is 7 times the daily average in MAT so far today, with calls outnumbering puts by nearly 5 to 1.

Toy makers have been among the strongest groups in the market recently, according to our researchLAB market scanner, supported by strong numbers at other names such as Hasbro and Jakks Pacific. They came into today's session up 21 percent in the last month, compared with a gain of less than 5 percent for the S&P 500.

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