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Ericsson draws long-term bullish bet

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Ericsson has been stuck near multi-year lows for much of 2012, but one trader is making a long-term bet that the Swedish telecom-equipment maker will eventually recover.

optionMONSTER's Heat Seeker tracking system shows that 5,000 January 2014 10 calls traded in a strong buying pattern, almost all of them going for $0.85. Volume was nearly 4 times higher than the strike's open interest of 1,326 contracts at the beginning of the day, indicating fresh buying.

ERIC closed at $8.85 on Friday, down a penny on the day. The stock climbed above $10 in mid-August but is now not far from the 52-week low of $8.23 reached in July, its lowest price since May 2009. Shares gapped lower after the company reported third-quarter earnings on Oct. 26, but Cowen upgraded the stock to "outperform" from "neutral" last Wednesday.

Friday's call buyer is looking for the stock to gain at least $2, or 22.5 percent, by January 2014. The options could be sold before then if premiums rise with a rally, but they will expire worthless if the stock doesn't move. (See our Education section)

Total option volume in the name was more than triple its daily average. Calls outnumbered puts by more than 11 to 1.

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