U.S. Markets closed

Why traders are bullish on Nuance

Mike Yamamoto (mike.yamamoto@optionmonster.com)

iPhone supplier Nuance has ridden Apple's recent resurgence, and traders are looking for more gains in the next several weeks.

The option activity was concentrated in the September 20 calls, which saw 6,300 contracts trade for $0.50 to $0.95 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest of 2,123 contracts, indicating fresh buying.

These long calls lock in the price where traders can buy stock through mid-September. But they could expire worthless if shares remain below $20. (See our Education section)

NUAN gained 1.76 percent yesterday to close at $19.68, rising above its 100-day moving average. The stock popped intraday after billionaire investor Carl Icahn said he had taken a "large position" in Apple, whose iPhones use Nuance's voice-recognition technology. This comes after Icahn disclosed last week that he had increased his holdings in Nuance itself to 16 percent, two days after the company lowered guidance in its quarterly report.

There was bullish action at various other NUAN strikes yesterday, but most of it was below open interest and therefore could be closing or opening positions. The January 23 strike did see 1,650 calls bought for $0.75 in less than 30 seconds in volume well above open interest, so that was new activity.

Total option volume in the name topped 29,000 contracts yesterday, quadruple its daily average for the last month. Overall calls outnumbered puts by a bullish 13-to-1 ratio.

More From optionMONSTER