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Will Louisiana Pacific keep building?

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Louisiana Pacific has rebounded sharply this month, and some traders are looking for the gains to continue for the next five weeks.

Nearly 1,300 August 18 calls traded in a bullish pattern on Friday for $0.50 to $0.80, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's open interest of 694 contracts before the session began, indicating new activity.

These long calls lock in the price where traders can buy the stock no matter how far it might climb, providing potential leverage to a rally. But the contracts could expire worthless if the shares remain below the $18 strike price. (See our Education section)

LPX rose 2.32 percent to $17.62 on Friday, closing above its 50-day moving average for the first time since mid-May. The lumber company had fallen with other names in the homebuilding sector on fears of rising interest rates in recent months, but the stock found support at the $15 level and has been coming back strongly.

Total volume in the name was double its daily average for the last month. Overall calls outpaced puts by more than 4 to 1.

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