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WellPoint bull ups ante before earnings

Mike Yamamoto (mike.yamamoto@optionmonster.com)

One trader is getting more bullish on WellPoint before its earnings report tomorrow morning.

optionMONSTER's Heat Seeker system detected the sale of 3,002 September 80 calls for $7.51 and the purchase of 3,002 September 90 calls for $1.58. Volume was below the previous open interest in the 80s but above it in the 90s, indicating that a position is being rolled to a higher strike.

The trader is apparently taking profits from the lower-strike calls and applying some of the proceeds to the higher-strike options, looking for even more gains. The new long calls are betting that WLP will rally above $90 by expiration in mid-August, but they will expire worthless if the stock remains below that level. (See our Education section)

WLP is down 0.3 percent to $86.74 this morning, ahead of its second-quarter report at 8:30 a.m. tomorrow. The health-benefits company hit $87.56 early in the session, its highest price since January 2008, the same month that shares reached their all-time high of $90.

Total option volume in the name already tops 11,200 contracts today, 7 times its daily average for the last month. Overall calls outnumbered puts by more than 11 to 1.

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