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Calls hold out hope for Francesca's

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A day after Francesca's was hammered for a weak earnings report, traders are hoping for a bounce in shares of the fashion retailer.

More than 1,800 January 20 calls have been bought this morning for $1.45 to $1.60, according to optionMONSTER's Heat Seeker real-time tracking program. The volume is well above the strike's previous open interest of 374 contracts, indicating that tradres are establishing new positions.

These long calls lock in the purchase price for the stock through early next year regardless of how far it might rise. The options could be sold earlier at a profit if premiums gain with a rally before then, but the contracts could also expire worthless if shares are below $20 in mid-January. (See our Education section)

FRAN is up 2.25 percent to $18.19 this morning. The boutique chain gapped down from $24 after the disappointing second-quarter results yesterday, but traders may now be focusing on a stock-buyback program that was announced at the same time.

Total option volume in the name is already far above its full-session average, with calls outpacing puts by more than 7 to 1.

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