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Why the bulls are logging onto AOL

David Russell (david.russell@optionmonster.com)

AOL pulled back to today, and the bulls rushed to get long.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 7,600 November 38 calls for $1.15. Previous open interest was just 446 contracts, indicating that new money was put to work on the long side.

These long calls lock in the price where shares can be purchased in the media and e-commerce company, which has been riding a wave of improving ad sales. The options let investors position for upside and leverage a rally, while limiting the amount of capital at risk--especially useful with quarterly results coming out before the opening bell next Tuesday, Nov. 5. (See our Education section)

AOL is down 2.86 percent to $36.28 in afternoon trading. It quadrupled between August 2011 and May 2013 but has been consolidating in a range since then. The stock pushed above its 200-day moving average earlier this month and retested that level today, a move that could make some chart watchers think that it's getting ready to push higher. Short interest also represented a hefty 15 percent of the float in mid-October.

Overall option volume in the name is quadruple its daily average so far today, according to the Heat Seeker. Calls account for a bullish 80 percent of the total.

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