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Call buyers are chasing CA breakout

David Russell (david.russell@optionmonster.com)

The bulls are chasing a breakout in IT consultancy CA.

Late yesterday, our Heat Seeker monitoring program detected heavy buying in the June 28 calls for $0.30 to $0.45. The stock rallied hard out of the gate today and those contracts roughly tripled to over $1.70. Now traders are going out another month into the future, buying the July 28s for $1.30 and the July 29s for $0.70 as they look for the shares to keep running higher.

These long calls lock in the price where CA can be purchased. Their cheap entry price lets investors limit the amount of capital at risk in a trade and can result in significant leverage in the event of a rally. (See our Education section)

The stock had been trapped below $28 for years but is ripping through that level today despite mediocre financial results in recent quarters. CA is up 4.23 percent to $29.18 in morning trading after touching an eight-year high of $29.83.

Total option volume in the name is 9 times greater than average so far today, according to the Heat Seeker. Calls account for a bullish 3-to-1 ratio.

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