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Bulls stay aboard United Continental

David Russell (david.russell@optionmonster.com)

United Continental has been strong all year, and traders want to keep flying the friendly skies.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 7,474 March 39 calls for $3.19 and the sale of an equal number of December 39 calls for $0.53. Volume was below open interest in the nearer-dated contracts, which indicates that an existing position was closed and rolled forward in time.

Long calls lock in the price where shares can be purchased in the Chicago-based airline company, letting investors cheaply position for a rally while minimizing risk. This way, he or she stands to earn potentially significant leverage from a rally over the next four months.

Adjusting the position today also let him or her avoid the accelerating pace of time decay that will erode the value of the December contracts into expiration on Friday. (See our Education section)

UAL is up 0.13 percent to $38.58 in afternoon trading and has risen 65 percent so far this year. The stock gapped higher on heavy volume a month ago after announcing $2 billion of annual cost cuts, then pulled back and has been bouncing in recent sessions. It's also found support around the same $36.74 level where it peaked in July, which suggests that its bullish uptrend remains intact.

Total option volume is twice the daily average so far today, according to the Heat Seeker. Calls outnumbering puts by a bullish 19-to-1 ratio.

UAL was cited as a buy on our Market Action webinar last Monday. One of the other stocks recommended that day, LSI, is exploding higher after accepting a $6.6 billion takeover offer this morning.

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