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How the bulls are playing Fusion-IO

David Russell (david.russell@optionmonster.com)

One way or another, the bulls think Fusion-IO is ready to bounce.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 January 15 calls for $2.05 and the sale of an equal number of January 18 calls for $1.05. Volume was below open interest at the higher strike, so there are two possible explanations for the trade.

One is that the investor previously owned the 18s, but then lost money as the data-storage company fell. Rolling the long-call position down to the 15s would increase his or her delta because the new contracts are closer to the money . (See our Education section)

Alternatively, both halves of the trade may have been opened. In that case, it was a bullish call spread with potential profit of 200 percent on a move to $18 by expiration early next year.

FIO is up 7.07 percent to $14.02 in afternoon trading. The stock gapped sharply lower on May 8 after a big management shakeup but has been holding its ground despite weakness in the broader market.

Its last earnings report in April was also strong, which could make some investors like the stock and look for a rebound.

Total option volume is quadruple the daily average so far today, with calls outnumbering puts by almost 9 to 1.

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