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December 13, 2012  Thu 3:47 AM CT

ALTR: SEE CHART GET CHAIN FIND STRATEGIES
Chip maker Altera is trying to break out of its recent range, and some traders apparently believe that it will succeed in the next six months.

optionMONSTER's Heat Seeker system detected the purchase of 1,231 June 34 calls yesterday, almost all of them going for $2.65. Open interest in the strike was just 14 contracts at the start of the session, so this is fresh buying.

The long calls are looking for ALTR to gain roughly 11 percent by mid-June 2013. These options could be sold earlier if premiums increase with a rally in the shares before then, but the calls will expire worthless if the stock doesn't rise at least to the $34 strike price. (See our Education section)

ALTR slipped 0.12 percent yesterday to close at $33.04 as it tried to recover from recent losses. Shares of the semiconductor company had gapped higher in July after beating quarterly estimates and raising its dividend but dropped sharply from above $38 to below $30 between mid-September and mid-October. Since then the stock has been trapped between about $30 and $32.50.

Calls outnumbered puts by more than 5 to 1, a reflection of yesterday's bullish sentiment.
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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.

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