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September 14, 2012  Fri 1:47 AM CT

O'Reilly Automotive has been falling hard, but yesterday's option activity was bullish.

Our Heat Seeker monitoring program detected the purchase of 6,100 October 95 calls for $0.25 and the sale of an equal number of October 70 puts for $0.13. Volume was more than 100 times the existing open interest at each strike, so this was clearly new positioning.

The trade cost just $0.12 and provides exposure to a fast rally in the auto-parts retailer. The position will expire worthless if the stock doesn't move quickly, and the trader faces losses in the event of a sharp drop.

The unusual performance profile results from the fact that both contracts are far from the money and will track movements in the share price less closely as time passes. (See our Education section for more on the life cycle of options.)

ORLY dropped 4.80 percent to $81.53 yesterday and has lost about 16 percent of its value in the last three months. Much of that decline came on June 27 after same-store sales missed estimates. It had peaked over $107 in early May.

Yesterday's bullish trade was tailored to benefit from a big rally in the stock and appears to be relatively speculative. The investor probably thinks that it has a low probability of success but also a modest risk of loss.

Overall option volume in the name was 23 times greater than average, according to the Heat Seeker.
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