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December 4, 2012  Tue 12:21 PM CT

One investor apparently thinks that Focus Media is getting ready to rally.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 4,000 April 26 calls for $0.75 and the sale of an equal number of December 22 puts for $0.35. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

The trade is bullish and results in double-long exposure to the Chinese media company, which owns digital advertising screens across the mainland. If FMCN rallies, the short puts will lose value while the long calls will appreciate. The opposite will happen to the downside. (See our Education section)

The unusual aspect of this strategy is that the investor bought calls that are longer-dated than the puts sold. That reduces their downside risk but also increased the cost because shorter-dated contracts have less time value. The trader paid $0.40 to open the position.

FMCN is down 2.46 percent to $23.81 in afternoon trading and has been grinding in a range since the summer. The stock gapped higher on Aug. 13 after Focus Media's CEO offered to take the company private for $27 a share.

Shares have been consolidating above their 200-day moving average since then, making higher lows in the last two months. That could be leading some investors to believe that it's getting ready to rally.

Total option volume is almost twice the daily average so far in the session, according to the Heat Seeker.
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