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Upside trade in First Majestic Silver

Mike Yamamoto (mike.yamamoto@optionmonster.com)

At least one trader apparently believes that First Majestic Silver will rebound in the next two months.

optionMONSTER's Heat Seeker system detected the purchase of 2,000 October 10 calls for $0.45 in less than 10 minutes late yesterday. The volume was above the strike's previous open interest, indicating that this is a new position.

These long calls lock in the price where the stock can be purchased through mid-October 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 $10. (See our Education section)

AG was down 1.62 percent to $9.72 yesterday. The silver miner fell sharply from $11 after reporting quarterly results on Aug. 13 and has trying to find support at current levels around its 100-day moving average.

Yesterday's total option volume in the name was more than triple its daily average for the last month. Overall calls outnumbered puts by a bullish 20-to-1 ratio.

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