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October 23, 2012  Tue 4:15 AM CT

KLIC: SEE CHART GET CHAIN FIND STRATEGIES
Kulicke & Soffa Industries has some great-looking numbers, and upside option activity gained pace yesterday afternoon.

optionMONSTER's Heat Seeker system detected the purchase of 2,100 January 11 calls in two blocks at the same second for $0.30. The volume was above the open interest of 1,797 contracts at the start of the session, so this is fresh buying.

Calls lock in the price where investors can buy shares and can generate some nice leverage if the stock rallies. But these options will expire worthless if it doesn't move. (See our Education section)

KLIC rose 2.01 percent to $9.64 yesterday. The company, which makes equipment used to assemble semiconductor devices, has a great-looking balance sheet and cash flows, with valuation levels in the single digits.

Overall calls outnumbered puts by about 3,200 to 400, a reflection of the session's bullish sentiment. Total volume was 4 times greater than average.

(A version of this post appeared on InsideOptions Pro yesterday.)
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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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