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February 20, 2013  Wed 4:45 AM CT

TMO: SEE CHART GET CHAIN FIND STRATEGIES
Thermo Fisher Scientific is already near all-time highs, and one large trader is wagering that it can surge even further.  

optionMONSTER's Heat Seeker system detected the sale of 5,000 March 75 calls for $1.60 and the purchase of 5,000 March 80 calls for for $0.75 and $0.70. Volume was below previous open interest in the March contracts but above it in the April options, suggesting that the nearer-dated position was being rolled forward.

The trader is probably selling the March calls after making a profit as the stock rallied and is using some of those proceeds to open a new position in April. This allows the investor to stay in the trade for another month while taking some money off the table.

The new long calls, which lock in the price where traders can buy stock, are looking for TMO to rise above $80 by mid-April. These options could be sold at a profit before then if their value rises with any rally, but they could expire worthless if the stock stays below that strike price. (See our Education section)

TMO rose 0.77 percent to $75 yesterday. The maker of laboratory-testing equipment gapped up to an all-time intraday high of $75.79 on Feb. 1 after its fourth-quarter earnings report.

Yesterday's call roll made up almost all the volume in the name, which was 9.5 times higher than its daily average for the last month. Only 135 puts changed hands in the session.
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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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