Options Trading News

April 1, 2013  Mon 3:41 AM CT

Ingram Micro is consolidating at long-term highs, and traders think a breakout is coming.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 1,200 April 20 calls for $0.20 and $0.25. Volume was almost 20 times open interest at the strike, indicating that new money was put to work on the long side.

Those calls lock in the price where investors can buy shares in the distributor of technology products. They can generate significant leverage if it pushes higher over the next three weeks. If IM climbs just 5 percent, for example, the calls will more than double in value. The benefit of the strategy is that it limits the amount of capital at risk in the event the stock falls. See our Education Section for more.

IM rose 0.05 percent to $19.68 on Thursday and is up 29 percent in the last six months. The $19 level was resistance for most of the last five years, but it gapped above it following a strong earnings report in February and has been consolidating since. That could make some traders think it's ready to run higher.

Investors may also like the stock because it trades for less than book value and trades for less than 10 times earnings.

Total option volume was 50 times greater than average in the session, according to Heat Seeker. Calls accounted for more than 90 percent of the total.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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