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September 30, 2013  Mon 4:45 AM CT

THOR: SEE CHART GET CHAIN FIND STRATEGIES
Thoratec drew bullish option activity on Friday for the second time in three sessions.

optionMONSTER's Heat Seeker system detected the sale of 1,800 October 37 calls for $0.80 and the purchase of 3,600 January 39 calls for $2.15. Volume was below open interest in the nearer-term contracts but well above it in the January options, indicating that a position was being rolled forward.

The investor is closing the October calls, which expire in three weeks, and buying another three months for the trade to work. The move is especially bullish because the trader is doubling the size of the position while moving it to a strike price that is $2 higher.

The new long calls lock a $39 purchase price for the stock through mid-January no matter how far it might rise, but they will expire worthless if shares remain below that level. The roll follows another bullish trade on Wednesday, when traders were buying the January 45 calls. (See our Education section)

THOR slipped 0.38 percent on Friday to close at $36.92. The cardiac-device maker gapped up from below $33 after its second-quarter earnings report at the end of July but has been range-bound between $35 and $38 since then. The company has not announced the date of its next quarterly release, but last year's calendar suggests that the results will probably come out in late October or early November.

Total option volume in Thoratec topped 7,200 contracts on Friday, 27 times its daily average for the last month. Overall calls outnumbered puts by more than 8 to 1.
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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.

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