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Long-term trade looks for rally in Ebix

Mike Yamamoto (mike.yamamoto@optionmonster.com)

It's been a tough year for Ebix, but one trader is looking for a rebound by next spring.

optionMONSTER's Heat Seeker system shows that 2,000 March 13 calls were bought at the same second for $1.40 on Friday. Open interest in the strike was just 100 contracts before the trade appeared, so this is clearly a new position.

These long calls , which lock in the price where the trader can buy shares, are betting that EBIX will rally above $13 by expiration in mid-March. The options could be sold earlier at a profit if premiums rise with a rally before then, but they will expire worthless if the stock remains below that level. (See our Education section)

EBIX fell 2.95 percent to close at $10.84 on Friday. The insurance-software company reported second-quarter results that morning, beating earnings estimates but missing revenue forecasts.

The stock had spiked above $21 on May 1 when management announced that the company would be acquired by a Goldman Sachs affiliate, but shares gapped down to $11 on June 20 when that offer was withdrawn on news of a federal investigation into allegations of misconduct. Ebix, which has also faced accusations from short sellers and shareholder lawsuits, has denied any wrongdoing.

Total option volume in the name on Friday was almost double its daily average for the last month. Overall calls outpaced puts by 3 to 1.

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