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E*Trade draws long-term bullish play

David Russell (david.russell@optionmonster.com)

One investor is placing a long-term bullish bet on brokerage company E*Trade Financial.

optionMONSTER's Heat Seeker tracking system detected a surge of volume in the January 2015 calls, which expire more than two years from now. An even 10,000 were purchased at the 10 strike for $1.65, and an equal number of the 17s were sold for $0.30. There was barely any open interest in either strike before the trade appeared, indicating that new positions were initiated.

This call spread cost $1.35 to open and lets the investor leverage a move between $10 and $17. If it climbs to the top of that range, the spread will expand to $7 and the position will appreciate by more than 400 percent. (See our Education section)

ETFC closed down 0.95 percent to $8.36 yesterday and has been languishing in its current range for more than a year. The online brokerage company's last earnings report missed expectations after bad mortgages at its banking unit forced management to set aside reserves against defaults.

Yesterday's trader apparently thinks that the stock will rebound in the long term and is looking for the share price to roughly double by the middle of the decade.

Total option volume was 16 times greater than average in the session, with calls outnumbering puts by more than 5 to 1.

Disclosure: E*Trade is a competitor of optionMONSTER's sister company, tradeMONSTER.

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