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Newell Rubbermaid draws bulls

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Newell Rubbermaid broke out of its recent range last week, and traders are looking for the stock to keep climbing through the summer.

optionMONSTER's Heat Seeker system detected heavy buying in the September 32 calls, where about 5,200 contracts traded for $0.75 to $1 yesterday. The volume was far above the strike's previous open interest of 444 contracts, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased through mid-September no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $32. (See our Education section)

NWL gained 0.48 percent yesterday to close at $31.21. The household-products manufacturer has risen sharply since last Wednesday, when Morgan Stanley upgraded the name to "overweight" from "equal weight" and raised its price target to $34.

Total option volume in the name topped 7,300 contracts yesterday, 33 times its daily average for the last month. Overall calls outnumbered puts by more than 17 to 1, a reflection of the session's bullish sentiment.

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