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Tech bulls bet on year-end rally

David Russell (david.russell@optionmonster.com)

Tech stocks are back to their highest level in more than a decade, and one investor is positioning for additional gains going into the end of 2014.

optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 26,000 December 42 calls in the SPDR Technology Sector Fund, most of which priced for $0.35. Volume is 760 times the previous open interest in the strike, which indicates that new money was put to work.

The XLK is down 0.25 percent to $40.19 in afternoon trading but earlier touched its loftiest price since late 2000. The exchange-traded fund is down along with its largest component, Apple, which is falling today after Pacific Crest analyst Andy Hargreaves threatened to downgrade the technology giant. He said the stock has already appreciated considerably in anticipation of its latest iPhone launch next week.

Today's trader is using long calls to manage risk heading into that event. He or she has now locked in a $42 entry price on the XLK and stands to generate significant profits from a rally much above that level. If it drops, the trader will lose only the premium. (See our Education section)

Total option volume in the fund is more than 9 times greater than average today, with calls outnumbering puts by 105 to 1.

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