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August 21, 2013  Wed 4:45 AM CT

BEAM: SEE CHART GET CHAIN FIND STRATEGIES
Traders are looking for Beam to reverse its recent losing streak.

optionMONSTER's Heat Seeker system detected the purchase of 1,800 December 67.50 calls, led by a print of 1,500 that went for $1.75. Open interest in the strike was just 172 contracts before the trades appeared, showing that these are new positions.

These long calls lock in the price where traders can buy the stock through mid-December no matter how far it might rise. They could be sold earlier at a profit if premiums gain with a rally before then, but the contracts could expire worthless if  BEAM remains below $67.50 in that time. (See our Education section)

BEAM rose 1.38 percent to close the session at $62.52, just above its 200-day moving average. The liquor company beat earnings and revenue forecasts on Aug. 8 but then fell sharply in subsequent sessions before bouncing at a four-month support level yesterday.

Total option volume in the name was just shy of 6,000 contracts yesterday, 10 times its daily average for the last month. Only 301 puts changed hands, a further indication of the session's bullish sentiment.
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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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