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More gains expected for Hospira

David Russell (david.russell@optionmonster.com)

Hospira has been fighting its way higher, and traders expect the trend to continue.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,000 October 40 calls for $1.85 and the sale of an equal number of September 40 calls for $1.20. Volume was below open interest in the shorter-dated contracts, which suggests that an existing position was closed and rolled forward in time.

Long calls lock in the price where shares can be purchased in the provider of injectable drugs, letting investors position for gains inexpensively while limiting the amount of capital at risk if the stock declines. They can also generate some nice leverage in a rally.

Rolling the position cost $0.65 and prevented the investor from being assigned shares at expiration today. (See our Education section for more on how to manage positions more effectively with options.)

HSP is up 0.44 percent to $41.25 in morning trading and has risen 32 percent so far this year. Shares climbed after a strong earnings report late July and then pulled back to the same $38.40 level where they peaked in March 2012, but they have been climbing since.

Total option volume is 35 times greater than average so far in the session, according to the Heat Seeker. Calls outnumber puts by more than 100 to 1.

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