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December 12, 2012  Wed 11:28 AM CT

JDSU: SEE CHART GET CHAIN FIND STRATEGIES
The bulls have been all over JDS Uniphase, and one investor apparently thinks that the stock may continue to rally.

On Nov. 20, optionMONSTER's Heat Seeker tracking system detected unusual buying in the March 12 calls for $0.69. They were leveraged to upside in the maker of communications gear and proceeded to almost triple as shares pushed higher.

Today, with the March 12s trading for $1.55, the investor sold 6,000 contracts to take profits and purchased another 7,000 March 14 calls for $0.64. The net result is that he or she collected $482,000, more than the initial investment, and still has the potential to keep making money if the stock continues to climb. (See our Education section)

JDSU is unchanged at $12.80 in early afternoon trading, and is up 32 percent since the beginning of last month. The rebound followed a weak earnings report in late October and after the shares bounced around the same $9.60 level that had been support over much of the previous year.

Total option volume is almost 5 times greater than average in JDSU so far today, according to the Heat Seeker. Calls outnumber puts by 17 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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