U.S. Markets closed

Will Symantec reach multi-year highs?

David Russell (david.russell@optionmonster.com)

Symantec has been parked at long-term resistance, and now the bulls are looking for a breakout.

optionMONSTER's tracking systems detected the purchase of 8,350 April 25 calls on Friday in volume that was 14 times higher than the strike's previous open interest of just 600 contracts, clearly showing that this is fresh buying. Most of those options were priced for $0.17 to $0.21.

Long calls lock in the price where investors can buy shares, so they have the potential to generate significant leverage in the event of a rally. But they will expire worthless if the stock doesn't move or declines.

The strategy seems to make sense in the case of SYMC, which has been sitting at $22 for the last week. That level marks a top for the security-software stock in September 2008, so traders may believe that it will face strong overhead resistance there.

Owing calls limits risk to a tiny fraction of the share price, giving them a taste of the profits if the stock explodes higher while limiting the pain if it drops. (See our Education section for more on why options should be a key element in every investor's toolkit.)

SYMC fell 0.62 percent to $22.53 on Friday but is up more than 27 percent in the last six months. That's more than 20 times the performance of the technology-laded Nasdaq 100 index over the same period.

Total option volume was almost triple the daily average, with calls outnumbering puts by a bullish 15-to-1 ratio.

(A version of this post appeared on InsideOptions Pro on Friday.)

More From optionMONSTER