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Bulls are returning to Alcatel-Lucent

David Russell (david.russell@optionmonster.com)

Alcatel-Lucent popped earlier in the month, and the bulls came back yesterday.

optionMONSTER's Heat Seeker tracking system detected heavy buying in the June 1.50 calls for $0.25 to $0.30. The first blocks crossed our screens late in the morning, and activity continued to build throughout the session. More than 23,000 would change hands by the close, compared with previous open interest of 1,597 contracts.

ALU fell 0.69 percent to close at $1.44 but pared earlier losses after the trades hit. The beaten-down telecom supplier is up 29 percent in the last week alone after securing a key loan from Credit Suisse and Goldman Sachs.

Long calls lock in the price where investors can buy stock, no matter how high share prices go. As a result, these options can generate significant leverage in the event of a rally but will expire worthless if the stock fails to move. (See our Education section)

Total option volume in Alcatel-Lucent was 13 times greater than average yesterday, with calls outnumbering puts by a bullish 160-to-1 ratio.

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

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