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January 23, 2013  Wed 11:34 AM CT

CA: SEE CHART GET CHAIN FIND STRATEGIES
CA Technologies has been surging this year and is up again today after its quarterly report, and one trader is betting that the stock will see more gains in coming weeks.

More than 3,700 February 26 puts traded in a strong selling pattern for an average price of $0.87, according to optionMONSTER's tracking systems. The volume was 10 times the strike's open interest of just 377 contracts at the beginning of the day, indicating new activity.

These in-the-money options are betting that CA will close above $26 at expiration on Feb. 15. The put seller is also showing a willingness to buy shares if the stock is below the strike price. (See our Education section)

CA is up 1.96 percent to $25.03 in midday trading, just above its 200-day moving average. The enterprise software company began the year by gapping up from below $22 and has continued to rise since then, breaking above its 100-day moving average last week.

The company beat earnings and revenue forecasts after yesterday's close while reaffirming its 2013 outlook.

Total option volume so far today is 9,641 contracts, already nearly 10 times its full-session average in the last month.
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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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