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Bulls riding Medtronic momentum

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Medtronic has been rebounding all month, and traders are betting that the upside momentum will continue for the medical-device manufacturer.

optionMONSTER's Heat Seeker tracking systemdetected the purchase of about 12,000 May 60 calls yesterday, most of which priced for $0.87 to $0.99. Volume was more than triple the strike's previous open interest of 3,661 contracts, indicating that new money was put to work on the long side.

These long calls lock in the price where the stock can be bought through mid-May, letting investors cheaply position for a move higher. The contracts can also generate significant leverage in a rally but will expire worthless if shares remain below $60. (See our Education section)

MDT rose 0.85 percent to $58.30 yesterday and is up more than 9 percent since hitting to a four-month low of $53.33 on Feb. 4. Shares initially fell after quarterly results on Feb. 18 but then resumed their climb. Management is scheduled to present at the Cowen Healthcare Conference on Wednesday.

Overall option volume in the name yesterday was 7 times its daily average for the last month. Overall calls accounted for a bullish 87 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)

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