U.S. Markets close in 6 hrs 25 mins

Rite Aid receives a bullish prescription

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Rite Aid broke through a key technical level yesterday, and a long-term trade is looking for more gains through the next year.

A block of 2,000 January 2014 1 calls was bought for $0.65 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was nearly twice as high as the strike's open interest of 1,121 contracts at the beginning of the day, indicating that this is a new purchase.

RAD rose 7.63 percent yesterday to finish at $1.41, the first close above its 200-day moving average since July 10. The drugstore chain gapped higher on Dec. 19 after posting a surprise third-quarter profit and has been climbing since then.

Yesterday's long calls , which lock in the price where the stock can be purchased, are looking for RAD to gain roughly 17 percent by the time they expire in a little more than a year. Buying these calls is similar to owning the stock because they are already deep in the money , which means that they will closely track the price of the shares. (See our Education section)

Total option volume in the name reached 8,900 contracts, 17 times its daily average. More than 8,300 calls made up the bulk of that activity, outnumbering puts by nearly 15 to 1.

More From optionMONSTER