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Why bulls are piling into Neonode

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are apparently banking on good results in Neonode's next quarterly report.

More than 4,900 March 8 calls traded in a strong buying pattern for premiums between $0.25 to $0.45 on Friday, according to optionMONSTER's Heat Seeker tracking system. These are new positions, as there was no previous open interest in the strike.

These long calls lock in the price where traders can buy the stock for the next six weeks no matter how far it might rise in that time. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if share remain below $8. (See our Education section)

NEON gained 6.36 percent on Friday to close at $6.19, rising back above its 50-day moving average. The company, which develops touch-screen technologies, began the year by surging above $7 but quickly reversed course and fell back to support at the $5.50 level before rebounding this month.

Neonode has not released the schedule for its next earnings report, but last year's calendar suggests that it will report fourth-quarter results in mid-March. The calls purchased on Friday expire on March 21.

Total option volume in the name was just shy of 6,900 on Friday, compared with a daily average of just 418 contracts in the last month. Overall calls outnumbered puts by a bullish 9-to-1 ratio.

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