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April 5, 2013  Fri 3:16 AM CT

PCS: SEE CHART GET CHAIN FIND STRATEGIES
The bulls continue to bet on MetroPCS Communications.

optionMONSTER's Heat Seeker tracking program detected the purchase of 18,000 June 12 calls for $0.50 and the sale of an equal number of June 14 calls for $0.09. Volume exceeded open interest at each strike, indicating that new positions were initiated.

Known as a bullish call spread, the strategy is designed to leverage a rally in the pre-paid wireless company. It cost $0.41 to open and will expand to $2--a profit of 388 percent--if shares close at or above $14 on expiration. (See our Education section)

PCS rose 1.46 percent to $11.12 yesterday. The stock more than doubled between July and October before pulling back, and it has been regaining momentum this year. It has quietly appreciated 10 percent in the last month, and traders have been taking notice.

The call buying began in late March, with bullish spreads on the 27th and 28th. Chris McKhann also analyzed a complex bullish strategy in the May contracts earlier this week on his "Trading & Abetting" webcast.

Total option volume was triple the daily average yesterday, according to the Heat Seeker. Calls outnumbered puts by 7 to 1.
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Education & Strategy

Sweet Spot Exceptions

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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