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Buyers tuning into Time Warner

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Time Warner broke out last month, and the bulls are looking for more gains.

optionMONSTER's Heat Seeker program showed that more than 9,300 July 70 calls traded yesterday, most of them bought for $0.87 to $0.99. The volume was far above the strike's previous open interest of just 497 contracts, an indication of fresh purchases.

These long calls lock in the price where the stock can be bought through mid-July no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $70. (See our Education section)

TWX rose 1 percent to $68.52 yesterday. The media and entertainment company's stock traded in an increasingly tight range in the first four months of the year, then climbed to a new 52-week high following a strong earnings report in late April, but it has been pulling back in the last week.

Overall option volume in the name yesterday was 5 times its daily average for the last month. Calls accounted for a bullish 78 percent of the total.

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

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