Options Trading News

July 5, 2013  Fri 4:14 AM CT

IMAX has pulled back to potential support, and the bulls are piling in.

optionMONSTER's Heat Seeker monitoring system detected the purchase of some 3,500 August 26 calls for $0.60 on Wednesday. Volume was more than 60 times open interest at the strike, indicating that new money was being put to work.

Long calls
lock in the price where shares can be purchased, letting investors cheaply position for a rally. The contracts can also generate significant leverage if the bet is correct. For instance, a 10 percent rally in the stock price would roughly double the value of the contracts. (See our Education section)

IMAX rose 0.32 percent to $24.78 in Wednesday's shortened session. The theater-technology company is now back near the same level where it peaked in October, which could make some chart watchers think that shares are at support. Short interest also represents one-quarter of the float, another potentially bullish catalyst.

Overall option volume in the name was 11 times greater than average, according to the Heat Seeker. Overall calls accounted for more than 70 percent of total activity.
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The art of trading

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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