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Bulls like shopping at Family Dollar

David Russell (david.russell@optionmonster.com)

The option action was highly bullish in Family Dollar Stores yesterday for a second straight session.

optionMONSTER's Seeker market scanner detected the purchase of about 3,000 December 72.50 calls for $1.30 and the sale of 2,000 November 70 calls for $0.20. Volume was below open interest in the November contracts that expire today, which suggests that an existing position was closed and rolled to the November 72.50s.

These long calls lock in the price where shares can be purchased in the discount retailer, letting investors cheaply wager on a rally. Adjusting their bet cost an additional $350,000. He or she also increased the number of contracts, indicating a strongly bullish outlook on the name. (See our Education section)

FDO rose 0.36 percent to $69.88 yesterday. It touched an all-time high above $75 in September, then pulled back to $67 by early this week before bouncing. The stock has been making steadily higher highs and higher lows since early 2008, so traders are looking for that long-term uptrend to continue.

Total option volume was 5 times greater than average in the name, with calls outnumbering puts by a bullish 16-to-1 ratio.

The Heat Seeker also showed heavy buying in the January 70s on Wednesday for $2.70, which traded for as much as $3.50 yesterday.

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