Options Trading News

January 3, 2013  Thu 4:32 AM CT

Riverbed Technology is drawing bullish option activity at an important juncture on its chart.

More than 1,800 January 22 calls traded in a strong buying pattern yesterday, with premiums rising from $0.21 to $0.35 throughout the day, according to optionMONSTER's Heat Seeker tracking system. The volume was more than double the strike's open interest of 782 contracts at the beginning of the day, indicating that these are new purchases.

RVBD jumped 7.3 percent to $21.16, breaking above resistance at its 200-day moving average. Shares of the networking-technology company had gapped higher on strong quarterly results and climbed to resistance around $24 in October, only to plunge back below $18 at the end of the month on news that it was buying software maker Opnet for $1 billion. Until yesterday it had been trading sideways between about $16.50 and $20.

The long calls purchased yesterday, which lock in the price where traders can buy shares, are looking for the stock to gain at least 5 percent by expiration on Jan. 18. The options will expire worthless if RVBD is below the $22 strike price at that time. (See our Education section)

Total option volume in the name exceeded 9,500 contracts, 7 times higher than its daily average of 1,360 in the last month. Calls outpaced puts by nearly 3 to 1.
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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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