Options Trading News

October 23, 2012  Tue 12:20 PM CT

One investor expects fireworks when Acme Packet reports earnings later this week.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 5,000 November 17 calls for $0.70 to $0.90. Volume is more than 28 times open interest at the strike, indicating that a new position was initiated.

APKT is down 2.12 percent to $15.73 in afternoon trading. The maker of telecommunications gear peaked over $80 last year, then proceeded to lose more than 80 percent of its value through this summer as business weakened.

The shares are now parked at a support level from late 2007, and short interest has climbed to 17 percent of the float. That could be encouraging traders to bet on a bounce.

But they're not alone. APKT's implied volatility has climbed to about 70 percent from 55 percent at the beginning of last month, indicating that option traders expect a big move higher or lower.

As a result, today's buyers need a rally of more than 10 percent to $17.80 before they make any money. If it climbs a smaller amount, the contracts could lose value as implied volatility drops after the news becomes public.

The company is scheduled to report quarterly results after the bell on Thursday.

Overall option volume in APKT is 6 times greater than average so far today, according to the Heat Seeker. Calls account for a bullish two-thirds of the activity.
Share this article with your friends


Premium Services

Upcoming Webinar:

Using Options For Income


Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »