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Buyers want to run Schwab higher

David Russell (david.russell@optionmonster.com)

Traders apparently think that Charles Schwab is ready to dash higher.

optionMONSTER's Heat Seeker monitoring program detected heavy call buying in the discount brokerage on Friday as investors snapped up the May 18 and June 18 calls.

The May contracts started trading in large size for $0.15, then tripled to $0.45 as the stock advanced. More than 12,200 changed hands in volume well above the strike's open interest of 3,590 contracts before the session began, indicating new activity.

Those buyers were looking for a quick rally by expiration at the end of this week. The long calls could generate massive leverage from even a small gain in shares, yielding profit of more than 500 percent on a mere 5 percent stock move to $19. (See our Education section)

The June 18s, which expire five weeks later, fetched $0.40 and doubled to $0.80 by the end of the session. Volume of 5,600 contracts in that trade surpassed the previous open interest of 3,971.

SCHW rose 3.31 percent to $18.09 on Friday. It rallied some 30 percent between December and February, paused, and then consolidated. The shares bounced sharply after testing support at their 100-day moving average early this month and have been ripping higher since.

Overall option volume was 14 times greater than average in the session. Calls accounted for more than 80 percent of the total.

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