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December 31, 2013  Tue 11:14 AM CT

JIVE: SEE CHART GET CHAIN FIND STRATEGIES
Someone apparently thinks that Jive Software is finally ready to rally.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,500 January 12.50 calls for $0.10 and the sale of an equal number of February 10 puts for $0.35. That translates into a credit of $0.25.

Investors often combine put selling with call buying to simulate owning a stock. The strategy works because selling puts generates income and creates downside risk, while buying calls costs money and provides upside exposure. (See our Education section)

Today's trade, however, is unusual because it uses different expirations. As a result, it will make money from a rally in the next three weeks but has risk of loss for one month longer. The investor may be comfortable taking that risk because the shares appear to be finding support around $10.

JIVE is down 0.54 percent to $11.05 in midday trading. The company lost more than two-thirds of its value in the second half of the year and gapped lower following its last two quarterly reports.

Nonetheless, short interest now represents a sizeable 18 percent of the float, which could potentially fuel a rally.

Total option volume is more than triple the daily average so far in the session, according to the Heat Seeker.
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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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