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Call buyers look for rally in ResMed

Mike Yamamoto (mike.yamamoto@optionmonster.com)

ResMed rarely sees unusual option activity, but the bulls were piling into the name yesterday.

optionMONSTER's Heat Seeker system identified heavy buying in the August 55 calls, where more than 6,000 traded for $0.25 to $0.60. There was no open interest in the strike before the trading appeared, so these are clearly new positions.

The long calls lock in the price where ResMed's stock can be purchased through mid-August 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 $55. (See our Education section)

RMD rose 0.47 percent to $49.59 yesterday. The respiratory-equipment manufacturer has pulled back from its recent peak just shy of $54 reached on June 13 but is now trying to find a base above its 200-day moving average.

Yesterday's call buying made up the vast majority of ResMed's total option volume in session, which was more than 13 times its daily average for the last month. Overall calls outnumbered puts by a bullish 58-to-1 ratio.

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