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July 5, 2012  Thu 3:28 AM CT

YNDX: SEE CHART GET CHAIN FIND STRATEGIES
Yandex is attempting to bounce at a key level, and the bulls are stepping in.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 4,100 November 21 calls for $2 and the sale of an equal number of November 26 calls for $0.50. Volume was more than 6 times open interest at both strikes.

The trade resulted in a cost of $1.50 and will earn a maximum profit of 233 percent if the Russian Internet stock closes at or above $26 on expiration. The strategy known as a call spread because it leverages a move between two prices. (See our Education section)

YNDX rose 1.58 percent to $19.27 on Tuesday but is down 28 percent in the last three months. It's been hammered along with most other emerging-market stocks as investors worry about financial contagion in Europe and slow growth in China.

Sentiment, however, has been improving more recently as investors return to economically sensitive assets such as oil and metals. YNDX peaked between $26 and $27 in April, and the bullish call spread is looking for a return to that level.

Overall option volume in the name was 9 times greater than average in the session, with not a single put changing hands.
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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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