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Buyers pile back into Dish Network

David Russell (david.russell@optionmonster.com)

The bulls are piling into Dish Network now that the company is abandoning a takeover war for Clearwire.

The satellite-television stock rallied almost 5 percent earlier in the session, returning to levels last seen in December 2007. The option paper hit not long after the opening bell as traders looked for the gains to continue.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 4,000 August 42 calls for $1.90 and the sale of an equal number of August 47 calls for $0.40. There was barely any open interest at either strike when the trade appeared, indicating that new positions were initiated.

Known as a bullish call spread , the trade cost $1.50 and will inflate to $5 if the shares close at $47 on expiration. That would translate into profit of 233 percent from the stock moving less than 15 percent. (See our Education section for more on how to generate leverage with options.)

DISH is up 3.23 percent to $41.50 in afternoon trading and has appreciated more than 50 percent in the last year. Today's gain comes after the company admitted defeat in its attempt to buy CLWR, which had already accepted a takeover offer from Sprint Nextel.

Later in the morning, a block of 4,000 July 39 puts were bought for $0.55 while 3,500 September 41 puts were sold for $2.45. It appears that an existing short position was closed and rolled to the higher strike, letting the investor earn more income. The trade also reflects a belief that there is limited downside in the stock.

Total option volume in DISH is about 2.5 times greater than average so far in the today.

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